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Apple’s iPhone is scheduled to make its way to Verizon’s network on Feb. 10, ending the exclusive deal that Apple had in place with AT&T for more than two years. That day will be an important one for both current and future Verizon customers. It will also be a landmark day for Apple as it brings its beloved smartphone to over 90 million more customers.
But the launch of Apple’s iPhone on Verizon’s network might be most important for the carrier itself. For years, its customers have waited patiently for Apple’s smartphone to make its way to Verizon’s network. Along the way, it has watched AT&T continue to perform well financially, and grow its customer base.
Now it’s Verizon’s turn. As it comes off a quarter where it couldn’t beat the Street on earnings, it’s clear that the iPhone couldn’t have come at a better time.
Here’s why:
1. The subscriber base is growing
If nothing else, Verizon has proved that it can keep its customers even without the iPhone. The company announced during its last earnings call that it added 872,000 postpaid customers and 803,000 retail customers during the last quarter. All told, it now has 94.1 million customers using its service around the United States. With that growth it seems like the perfect time for Apple and Verizon to turn many of those customers into paying iPhone users.
2. It’s not beating AT&T without the iPhone
What better time for Verizon to get the iPhone than when it’s trailing AT&T in revenue and profits? During the third quarter, the last time AT&T reported its earnings, the company generated over $31 billion in revenue and an $11.6 billion profit. Verizon, on the other hand, generated over $26 billion in revenue and just $881 million in profit during that quarter. That’s certainly nothing to scoff at, but the major difference in earnings seems to indicate that Verizon needs to boost its revenue and profits. It can get that with the iPhone.
3. Its 4G network is far ahead
Although it’s nice to have the iPhone, that device alone won’t be enough for Verizon to coax AT&T users to come to its service. After all, they already have the iPhone. But if Verizon can make the point that it has the best service along with the iPhone, it might have a better chance. That’s why it’s quite fortuitous forVerizon to get the iPhone now when it has a sizable lead over AT&T in 4G. As of this writing, its 4G service is in about 38 cities across the United States. AT&T has yet to release its offering. That’s an important distinction that might help Verizon attract AT&T’s iPhone users.
4. Earnings aren’t matching expectations
As mentioned, Verizon had some trouble matching AT&T in the third quarter. In its fourth-quarter earnings, which it announced on Jan. 25, Verizon missed the Street’s earnings expectations by all of 1 cent per share. That’s miniscule, but it indicates that the market is expecting more from Verizon and it’s just not getting it. With the iPhone, it might be able to turn things around. Apple’s smartphone is wildly popular and Verizon customers are dying to get their hands on it. The smartphone could be the secret to reigniting Verizon’s earnings.
ATandT Catching Up to Verizons Subscriber Base
5. The momentum is there
If there is anything that Verizon needs right now, it’s momentum. The company’s shares have been relatively stagnant over the past few months, and its earnings have been somewhat lackluster. But the iPhone has all the momentum Verizon needs. Not only does it continue to sell extremely well, but the hype surrounding its launch on Verizon’s network is unprecedented. Verizon needs a kick start, and the iPhone might just be that.
6. AT&T is going after Android in a big way
As Verizon prepares to invest in Apple’s iPhone,its top competitor is realizing the value of Android. In fact, AT&T is expected to double-down on Android this year, bringing about a dozen new devices to its network in 2011. Whether or not those products will be able to match Verizon’s superior Android offering, led by the Motorola Droid X, remains to be seen. But if AT&T is worrying more about Android than it has in the past, Verizon should be happy to see the iPhone coming.
7. It dampens investor concern
As mentioned, Verizon’s earnings have been somewhat lackluster over the past couple quarters, especially when they’re compared with AT&T’s. That disappointing showing has caused some investors to worry about the future of the company and whether or not their cash is being wisely invested. But luckily for Verizon, the iPhone has lessened those concerns and made those folks realize that betting against Verizon might not be the best idea just yet.
8. It can justify forward-thinking worries
Verizon has said that it will need to dole out sizable subsidies in order to get the iPhone to the same price that AT&T is selling the device for. That should push expenses higher and potentially cause financial concern for the company. But those who are worried also realize that the iPhone is pushing revenue much higher through service plans. So, while it might not be good to incur higher expenses because of the iPhone, over time, it will likely prove to be well worth the investment. And it’s better to take that hit now when things are still going relatively well than a year from now.
9. AT&T is still gaining
Aside from its outstanding financial performance, it’s important to note that AT&T continues to grow its subscriber base. In fact, during the last-reported quarter, AT&T said that it had 92.8 million subscribers. During that period, it gained 2.6 million subscribers and put it within striking distance of Verizon. AT&T is expected to announce its fourth-quarter earnings later this week. If it sees similarly impressive subscriber growth as is expected by analysts, the company could come close to, if not beat, Verizon’s total subscriber base. If that happens, Verizon will be thanking Apple for finally bringing its iPhone to its network.
10. It’ll capitalize on iPad 2, iPhone 5
One of the key aspects of Verizon getting the iPhone now ishaving the ability to offer the iPhone 5 and iPad 2 on its network. If Verizon waited too much longer, Apple would have announced the iPad 2 and the iPhone 5 with AT&T 3G connectivity and service. Those who wanted to get their hands on, say, the iPad 2 and connect it to Verizon’s network would need the MiFi 2200 hot spot that iPad owners currently need. It wouldn’t have been good. By getting the iPhone now, Verizon has positioned itself to get in on every new iPad and iPhone Apple releases from here on out.