AT&T Reveals iPhone Service Prices, Analysts Bullish; Apple Rallies

Shares of the Cupertino, Calif.-based company gained $7.26, or 4.3 percent to close at $174.68 on the Nasdaq stock market.

New subscribers or customers eligible for an upgrade phone from AT&T, the exclusive US carrier of the iPhone, will be able to purchase Apple's newest device for $199 for an 8-gigabyte model, or $299 for the 16-gigabyte model, the carrier said.

AT&T also said it would sell the iPhone without a service contract at some point in the future, though customers would pay a much steeper price: $599 and $699 respectively.

Analysts speculated that the high prices of the phone suggests that the consumer electronics maker is raking in high subsidies from AT&T.

"Given the $599/$699 price of an unlocked iPhone, we estimate this implies a net subsidized iPhone [average selling price] of up to $550 to Apple, which is $200 higher than the $350 we currently have modeled," Ben Reitzes of Lehman Brothers told clients.

Shares of AT&T slipped 39 cents, or 1.2 percent to $33.30 to close.

The new phone, slated to be released on July 11, will feature the media player and internet capabilities alongside calling that made its predecessor a success. It will also give users precise coordinates with a built-in global positioning system, and much faster download speeds with 3G network capabilities.

The new speed comes at a cost however. Monthly plans have been priced at $70 at the low end and $130 at the high end.

Bernstein analyst Toni Sacconaghi notes an increase in AT&T's service fees effectively means that the total cost of ownership for the new iPhone is higher than the previous generation phone, though he concedes "most potential buyers are unlikely to do the math."