Report: ATandT, Apple in iPhone Contract Talks

How much longer can AT&T hang on to its exclusive contract with Apple's white-hot iPhone? A report from The Wall Street Journal says company CEO Randall Stephenson is pushing for exclusivity rights through 2011.

Sources quoted by The Wall Street Journal (WSJ) say telecommunications giant AT&T's CEO, Randall Stephenson, is pushing to extend the company's exclusive contract with Apple for the popular iPhone, which "people familiar with the matter" say expires this year. The WSJ reported that Stephenson is looking to extend the relationship through 2011.
Apple refused to comment on the report, noting only that they have a "great relationship" with AT&T, which has experienced a revitalization of its brand since it started carrying the iPhone in 2007. The continued, and expanding, popularity of Apple's touchscreen smartphone, which has become an iconic device, suggests AT&T would be wise to fight hard to keep its exclusive deal with the iPhone. AT&T has benefited tremendously from the contract picking up 4.3 million iPhone subscribers in the second half of last year, of which 40 percent were newly acquired customers.
Apple and AT&T have negotiated contract extensions before, in fact. In August 2008, the two companies agreed to extend their relationship through 2009 after AT&T came to Apple with a $300-per-iPhone subsidy in lieu of a revenue-sharing model. While Stephenson admitted the move would dilute earnings through 2009, the company could now offer the feature-packed iPhone 3G for $199 with a two-year contract.
Stephenson told the WSJ that the deal was indeed a multi-year contract but declined to elaborate, and said substantial investment in wireless technology would be made regardless of the company's involvement with Apple. "This business cycle is going to cycle," Mr. Stephenson told the WSJ. "You got to make sure that you're positioned when it cycles back out to be the leader in the industry, and to do that you have to be the leader in mobility, first and foremost."
This March, AT&T announced it would offer iPhones without the two-year plan for $599 or $699, although those phones are locked to AT&T's network. Apple quickly followed suit in its own retail stores. All told, Apple has sold more than 17 million iPhones in less than two years. In August 2008, Gene Munster, an analyst with investment firm Piper Jaffray, boldly predicted Apple would sell 45 million iPhones in 2009. More conservative estimates put the figure closer to 25 million.
Rumors are swirling yet again as to what features Apple will include in the upcoming upgrade, unofficially dubbed the "iPhone 3.0" or "iPhone 4G". Various reports suggest the latest iPhone will offer video editing software, a built-in FM radio and support for 802.11n Wi-Fi networking. A report by Lazard Capital Markets semiconductors analyst Daniel Amir, suggests production of two versions of iPhones will be introduced this year, debuting in June.