Apple to Offer Free iPhone With Contract?

On Monday, Deutsche Bank analyst Chris Whitmore predicted Apple would grab a part of the pre-paid mobile market share by introducing an unlocked mid-level iPhone in 2011. On Tuesday, BMO Capital analyst Keith Bachman said Whitmore’s report was wrong because Apple is about making high-end devices, and would never release a low-end phone. Bachman predicted that Apple would re-market the iPhone 3GS to nab budget-conscious customers.

And Today… Analyst Mike Abramsky with RBC Capital Markets said Apple is “expected” to offer the iPhone 3GS for free when they announce the iPhone 5 later this year! He claims doing so will help Apple with mid-market buyers, and slow the growth of Android devices. The only two things that analysts seem to agree Apple needs to do.

“While a $49 iPhone is already available (AT&T), psychologically a $0 iPhone provides a compelling offer,” Abramsky wrote in a note to investors. “Proprietary survey data… suggests 14% are very/somewhat likely to buy the iPhone 3GS for free with 2-year contract, exceeding buying interest for the onclick="javascript:pageTracker._trackPageview('/outgoing/www.ipadngravy.com');" target="_blank" title="iPad" href="http://www.ip4help.com">iPad (13%) and original iPhone (9%).”

Offering a two-year-old model after a new generation device is announced is not normal behavior for Apple. The oldest model, like the iPhone 3G, is normally discontinued.

The iPhone 3GS is compatible with Apple’s new operating system, iOS 5, which is launching this fall. The phone would be free with a two-year service contract. It’s currently $49 in the U.S..

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