Report: Verizon and Apple in iPhone Negotiations

While exclusive Apple iPhone carrier AT&T fights to extend its exclusive contract, USA Today reports “people familiar with the situation” say Verizon Wireless, which operates the largest wireless telecommunications network in the United States, is in negotiations to bring the popular smartphone to its network by next year. This would be the first iPhone to run on a CDMA wireless network.

The paper reports “high-level” representatives from the carrier, co-owned by Vodafone, entered discussions with Apple earlier in the year, though no specific details were disclosed. Vodafone currently markets the iPhone in Europe.

Roger Entner, head of telecom research for Nielsen, told USA Today that AT&T’s loss of an exclusive contract would have a major impact on the company. "Breaking the [iPhone] exclusivity with AT&T is a huge thing," he said in an interview. "That would send shivers into AT&T's stock and senior leadership."

Entner told the paper that a deal between Verizon and Apple would be a positive development for consumers because it brings choice to the marketplace and would allow customers who want an iPhone and prefer Verizon’s network the opportunity to own one. Apple would gain access to Verizon’s 85.7 million U.S. subscribers.

The speculation comes just weeks after a report in The Wall Street Journal said telecommunications giant AT&T’s CEO, Randall Stephenson, was pushing to extend the company’s exclusive contract with Apple. That contract expires in 2011. At the time, Apple representatives declined to comment but told the WSJ they have a “great relationship” with AT&T.

The iPhone has been a smash success for AT&T, with the company picking up 4.3 million iPhone subscribers in the second half of last year. Of those subscribers, 40 percent were newly acquired customers.

On April 20, Telephony Online reported AT&T is making software enhancements to its 3G network due to steady demand for iPhones. Later this year, AT&T said it plans to begin transitioning its 3G networks to evolved-HSPA (HSPA+), which would triple peak speeds, and then move on the 4G technology LTE (Long Term Evolution).

When AT&T released its first-quarter results last Wednesday, it was clear the iPhone was providing a boost for the company. "We said that our upfront investment in iPhone customers would depress margins in the short term," AT&T Chief Financial Officer Rick Lindner said on a conference call. "But given the attractive customer profile, it would support margins in the quarters and years ahead, and that's what you see in our first-quarter results."

In an economic climate where enterprise-level companies are reporting huge declines in revenue and profits, the iPhone is helping Apple as well: During the second quarter of 2009, retail sales rose 1 percent compared with the same quarter in 2008, “predominantly to increased iPhone revenue” Apple documents filed with the Securities and Exchange Commission revealed.