Last updated: June 27, 2007 1:48 am

iPhone costs hit Apple shares

Shares of Apple fell more than 2 per cent on Tuesday after Apple and AT&T revealed three new pricing plans for iPhone.

The companies said iPhone customers would have to pay between $59.99 and $99.99 a month in service charges in addition to the $499 it costs to buy the long-awaited handset, which is set to hit US stores on Friday.

The fall in Apple’s share price came in spite of the fact that the pricing scheme was comparable to data and voice plans offered by rival carriers for other smart phones.

“This thing is so incredibly hyped,” said Van Baker, an analyst at Gartner. “I haven’t seen a product launch that has this much buzz around it as this one has in my entire career.

“It’s an impressive little device, but whether it can live up to the expectations that are so blown out of proportion remains to be seen.”

AT&T said the service plans, which require a minimum two-year contract, were designed to make it simple for customers to use the full spectrum of iPhone features, from making calls to surfing the internet.

The iPhone is expected to form the centrepiece of AT&T’s new mobile business, which is being rebranded after it bought the remaining stake in Cingular it did not already own last year as part of the BellSouth deal.

Although the iPhone is likely to be one of the most widely-watched product launches in history, analysts have pointed out potential weaknesses in the handset, including the fact that it will run on a slower 2G radio connection, rather than on faster 3G phone networks.

Apple has yet to announce mobile partners for the iPhone in Europe and Asia, where it is expected to launch later this year and in 2008, respectively.

AT&T also said customers would be required to take out a service plan before they could use their iPhones for non-phone related tasks such as listening to music, watching films or viewing pictures.

Mr Baker at Gartner said the restriction was unlikely to dissuade consumers. “It doesn’t make sense to go buy an iPhone if you don’t want the phone features,” he said.

Apple’s shares closed 2.2 per cent lower on Tuesday at $119.65.

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