Verizon paid dearly to put iPhones in the hands of subscribers in the latest quarter, holding back its profits in the hope that its customers will rack up higher monthly bills and stay loyal.

The quarter saw the launch of the iPhone 4S, the second model to be sold by Verizon, and it was clear that many had been waiting for it. Verizon on Tuesday said it sold 4.3 million of them, and 7.7 million smartphones total.

But by the upside-down logic of the wireless industry, higher sales mean lower profits for the quarter. Verizon Wireless subsidizes each smartphone by hundreds of dollars, figuring that it will make the money back in service fees over a two-year contract. That means the wireless division, though still highly profitable, posted a rare drop in operating income for the fourth quarter.

An iPhone that Verizon buys from Apple for around $600 is sold in stores for $200. The question is whether phone companies ever really make that money back.

Read more about Verizon’s earnings here.