AT&T Discounts iPhone 3GS To $49

Top 10 Mobile Stories Of 2010

With Verizon Wireless expected to carry the iPhone soon, AT&T plans to cut its price for the iPhone 3GS to $49 starting Friday.

The discount will be available through AT&T's Web site, retail partners, and the company's more than 2,200 stores nationwide, AT&T said Thursday. To get the lower price, people will have to sign a two-year service contract, which starts at roughly $70 a month.

AT&T currently sells the iPhone 3GS for $99 with a service contract and the iPhone 4, Apple's latest model, for $299. The latest offer comes as AT&T prepares for Verizon Wireless to start offering the iPhone this year. AT&T has been the exclusive U.S. carrier for the smartphone since its release in 2007.

Most of the profit from iPhone sales goes to Apple, while AT&T makes most of its money from service contracts. By dropping the price of the device, AT&T is apparently hoping to entice as many new subscribers as possible, as competition heats up not only from Verizon, but also from the many Android smartphones hitting the market at prices lower than the iPhone.

The iPhone has been a major contributor to AT&T's wireless subscriber growth over the last several years. The company in the third quarter of 2010 reported a net gain of 2.6 million customers, the highest in the company's history. At the end of the quarter, AT&T, the nation's second largest wireless carrier, had 92.8 million subscribers.

Verizon, the nation's largest carrier, added 997,000 new customers in the third quarter to reach a total of 93.2 million.

AT&T's growth in the quarter included a record 5.2 million iPhone activations. The number was 62% more than the previous quarterly record of 3.2 million. The company says nearly a quarter of the activations were for customers new to AT&T.