iPhone subsidy squeezing margins at Verizon and Sprint

According to a Reuters report, the heavily subsidized iPhone is squeezing profit margins at Verizon and Sprint because they are forced to lower the prices of high end phones to compete with AT&T. The economic conditions are also making the consumers cut down on additional services and add-ons. According to the article:

"The derivative effect is lower profitability in wireless for all the carriers," said UBS analyst John Hodulik, adding that the iPhone is selling faster than he expected, which is actually bad for AT&T's profitability in the short term.
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AT&T, which reports results on Wednesday, is seen as the worst hit, with JPMorgan analyst Michael McCormack forecasting what he called a "shocking" drop in its mobile profit margin to 36.1 percent in the third quarter from 41.2 percent in the second quarter.
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McCormack forecast the margin at Verizon Wireless, owned by Verizon Communications and Vodafone Group Plc (VOD.L), to fall to 43.8 percent from 45 percent.
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McCormack forecast Sprint's margins falling to 24.7 percent from 25.7 percent in the second quarter. "