Will Apple Go Downmarket With Cheaper, Prepaid-Compatible iPhone?

When Apple (AAPL) rolls out its next-generation, high-end iPhone 5 -- a launch expected to take place in September -- one analyst is predicting the company will also shoot for the low-end market by introducing a second, inexpensive iPhone model that's capable of working with prepaid phone plans, says a CNBC report.

Such a move would make sense, given the setback Apple has suffered over the past 12 months as Android-based phones took the lead from the iPhone. Apple must compete against an army of smartphone makers using Google's (GOOG) Android operating system, offering a variety of phones in a wide range of price points.

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According to the report, which cites a Deutsche Bank (DB) analyst note, Apple is considering pricing a prepaid calling capable iPhone at $349. Currently, for an iPhone 4 with 16 GB that can be used with the carrier of your choice -- and isn't locked into a two-year contract with a wireless company -- consumers must pony up $649. That iPhone 4 also sells for $199 with a two-year carrier service agreement.

If Apple wants to establish a meaningful presence in emerging markets, offering a phone that can handle prepaid calling plans is a good start. Analysts note that customers in emerging markets tend to favor prepaid phones, as well as inexpensive handsets.

While Deutsche Bank's analyst expects to see a new low-end iPhone model from Apple, an analyst with BMO Capital Markets (BMO) believes Apple's solution will be to trot out its older generation 3GS models, according to a Barron's report. Apple currently sells a 3GS with 8 GB for $49 with a two-year AT&T contract.
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