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    Verizon iPhone Deal May Include Shutting Out T-Mobile, Sprint: Analyst

    Written by

    Michelle Maisto
    Published December 6, 2010
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      As a Verizon Wireless iPhone becomes “closer to reality,” the carrier may be negotiating to prevent competitors Sprint and T-Mobile from getting iPhones of their own, according to a Dec. 6 research note from Kaufman Bros. analyst Shaw Wu.

      Following Apple’s record shipments of 14.1 million iPhones in the September quarter, Wu describes Apple as being “back in the driver’s seat” and Verizon more willing to accept Apple’s terms, for three reasons: the popularity of Apple’s smartphone, Google’s Android OS starting to “lose some of its luster [at Verizon]” and the expectation that the newest Research In Motion handsets won’t be doing Verizon many favors.

      “Our sources indicate that [Verizon] does not believe the pending launch of BlackBerry 6 on its network is likely to have a material impact,” states the report.

      Wu added that Verizon may also be more willing to accept Apple’s terms if Apple agrees to sweeten the deal with some AT&T-style exclusivity. (Since the 1997 launch of the iPhone, AT&T has been its exclusive U.S. provider.)

      “We are hearing that [Verizon] does not want iPhone, the hottest selling smartphone, available on T-Mobile USA and/or Sprint and may be willing to pay for exclusivity to itself and AT&T,” writes Wu. “For these reasons, [Verizon] could be more willing to give in to Apple’s terms and thus its iPhone economics are likely to remain favorable with the pending launch of [Verizon] in the [first half of 2011].”

      Kaufman Bros. expects Apple to ship 62 million iPhones in 2011 and believes Verizon could contribute 2 million to 3 million units per quarter, taking into account that Verizon sales would “cannibalize” a bit of AT&T market share.

      Verizon began rolling out its 4G LTE network Dec. 5 and is widely expected to steal more than a few current AT&T subscribers when it does. AT&T has notoriously struggled to support the data needs of its iPhone customers-particularly in population-dense areas such as New York and San Francisco.

      To point, a recent Consumer Reports study found AT&T to be considered the nation’s worst wireless provider. In addition to scores provided by readers, the publication rated carriers across several categories, including value, voice, texting, data and phone. U.S. Cellular, the nation’s sixth-largest network, actually came out on top, with a reader score of 82 out of 100. Verizon came in second, with 74 points, followed closely by Sprint, with 73. T-Mobile was rated fourth, with a score of 69, and AT&T finished dead last, with a rating of 60 out of 100 points.

      AT&T responded to the findings in a statement, saying, “We take this seriously and we continually look for new ways to improve the customer experience.”

      Additionally defending the carrier, the statement added that “hard data from independent drive tests” have shown AT&T to have the nation’s fastest mobile broadband network, with competitors’ speeds clocking 20 percent slower on average.

      The sentiments of AT&T customers, however, seemingly did little to prevent the operator from signing up record numbers of subscribers during its fiscal third quarter, which saw the addition of 2.6 million wireless subscribers and $31.6 billion in revenues. During the quarter-likely with the end of its iPhone exclusivity nigh-AT&T widely diversified its mobile handset portfolio and added a number of other exclusive offerings. AT&T president and CEO Ralph de la Vega called the quarter “everything we could hope for and more.”

      Kaufman Bros.’ Wu stated that the expansion of the iPhone to another carrier is important for Apple, as AT&T approaches a saturation point with the iPhone. Adding Verizon to its carrier roster, said Wu, could arguable double Apple’s total available market. And notably, T-Mobile and Sprint combined-with their 34 million and 49 million wireless subscribers, respectively-are nearly equal to Verizon, at 93 million subscribers.

      Also noteworthy is that Verizon, like AT&T, began selling Apple’s iPad in October. Wrote Wu, “We continue to believe that this marks a big progressive step.”

      Michelle Maisto
      Michelle Maisto
      Michelle Maisto has been covering the enterprise mobility space for a decade, beginning with Knowledge Management, Field Force Automation and eCRM, and most recently as the editor-in-chief of Mobile Enterprise magazine. She earned an MFA in nonfiction writing from Columbia University.

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