Here's the understated reason why iPhone sales will spike in fourth quarter 07

Om notes predictions from UBS Research analysts that three million iPhones will be sold this year. Two million of those are expected to move in the fourth quarter (Oct.-December). That supersedes UBS' earlier prediction of 1.5 million iPhones sold in 4Q and some 2,250,000 million this year.

The price cut from $599 to $399 is obviously the big change agent. But there's another factor at play here that I am not seeing widely articulated today.

It's obvious that any 4Q is the heaviest in terms of cell phone sales. What's not immediately obvious, but a logical assumption is that 4Q is also the heaviest in terms of new cellphone service contracts. It would follow that these contracts would be written at the time all these new mobiles are purchased.

Stands to reason, then, that with so many mobile contracts having a 24-month life, then the mathematics are right in terms of a rash contract expirations and renew-or-switch decisions set for 4Q as well.

I believe that in 4Q, a substantial percentage of new iPhone buyers will be attracted to the device not only because it costs $200 less than when it was rolled out- but because a large number of prospective iPhone buyers will see their wireless contracts expire. No longer encumbered by early termination fees, they will feel free and clear to switch to iPhone exclusive carrier ATT.

This also ties in to Om's noting UBS estimates that AT&T will add about 3.8 million new subscribers in the third and fourth quarter of 2007, and they estimate that “roughly 45% of the iPhone additions will be new subscribers for the company.