Analyst: AT&T Screwed Without iPhone Exclusivity
by John Paczkowski
Posted on July 17, 2009 at 7:40 AM PT
There’s no question that AT&T’s iPhone-exclusivity deal has been a strategic coup for the carrier. Since its debut in 2007, the device has drawn millions of new customers to the company and done much to revitalize its brand. But the carrier’s deal with Apple (AAPL) won’t last forever, and as soon as it expires, the telecommunications giant will face slowing growth and worse, defections.
So says Pali Research, which in a research note this week argued that AT&T (T) should be very worried about the prospect of Verizon adding the iPhone to its handset lineup.
“As the iPhone exclusivity period rolls off between AT&T Wireless and Apple, a material number of AT&T customers will flock to Verizon’s superior network,” the firm states. “We estimate that nearly a third of AT&T’s post-paid customers are being retained by AT&T primarily because of the iPhone exclusivity.”
An unsettling thought for AT&T, whose five-year agreement to be the iPhone’s sole U.S. provider is reportedly set to expire in 2010. Especially since there are several compelling reasons for Apple to offer the iPhone to Verizon (VZ).
For one thing, the move would give Apple access to about 80 million new Verizon customers. For another, it would bring the iconic device to a carrier that might, you know, reasonably support all its features, a carrier whose LTE “4G” network isn’t four-to-five years off, a carrier whose name doesn’t elicit laughter and jeers at Apple’s Worldwide Developers Conference.
So why extend AT&T’s exclusive deal? If there’s a good reason, Pali doesn’t see it. The research house is betting on the iPhone coming to Verizon. And when it does…
“We expect AT&T Wireless net subscriber additions to fall to less than 1 million in 2010 from more than 4 million in 2008. With an LTE-based iPhone in 2011, we believe Verizon could take even more market share resulting in a contraction in AT&T’s subscriber base in that year.”
Comments
AT&T can do a few things to attack this problem:
1) Lower the bar for existing customers to upgrade to the 3GS, locking them in for another two years.
2) Lower the data plan cost that’s barring new customers from signing up for the iPhone
3) Get serious about upgrading the network. It’s become a “real soon now” thing, i.e., it’s *always” going to be “real soon” and never actually get here. The sooner they do this, the sooner they can support tethering and MMS. If I could tether now I’d consider dropping my ***Verizon*** DSL. Most of my web activity is now on the iPhone.
My contract’s up next year, and I’m outta there if there’s a better option.
Posted by Bill DiCecca at July 17th, 2009 at 8:31 amATT maybe screwd if Apple moves to Vz, but the question is why?
Right now Jobs has complete autonomy on how, what, and when his iphone and ITunes gets built and deployed.
I seriously dont think Vz is willing to bow before Jobs and be there beck and call lackey. Vz is too too structured, and stovepiped. think ex-baby bell stooges with their deathgrips on the infrastructure.
And Vz’s 4G network the only benefits to their on demand stuff is when your ON a 4G network. trying to d/l stuff on anything less is like pushing chilli through a garden hose.
ATT has much better coverage across the US then Vz. Here in DC, the only benefits ive seen to Vz is in the Metro, everywhere else No signal.
Naw, for Apple/Jobs to jump ship it would take a monumental error on ATT, and some lucrative dealing and most importantly, the reinstatement of a complete monarchy within Vz.
Posted by mike diaz at July 17th, 2009 at 9:43 amGo with both carriers and let the people decide. Nice.
Posted by Neil Anderson at July 17th, 2009 at 2:01 pmVerizon allow a customer to use MORE features??? Verizon users will be lucky if they are allowed to use wifi and the iphone app store and not be forced to use “get it now”.
Posted by bob smith at July 18th, 2009 at 8:37 amAll of them need to quit the bickering, and open the playing field.
AT&T has poor service- bought crippled carriers to build up it’s subscriber base.
Verizon – too many issues to list here
Sprint has issues too (Pre is not fast enough for games) is it just a glorified Java Palmpilot?
All the while they are battling users are jumping all over the place trying to find the best deal. Whether a contract or not.
Sprint’s thinking $99 for everything is king, when it still has fine print. Even Boost & Cricket Wireless offering unlimited plans ($59) but then fine print says 5gb/mo max – isn’t that ambiguous?
Then you have the phone company issue themselves, CDMA/GPRS and who knows what other data structures will keep others simply out of the market. For crissakes companies- make your service something that people flock to rather than gimmicks, bells and whistles. It’s amazing that 21st Century is being spoiled by 19/20th century bean counters. Add video phone and everyone will move to you!
Eventually the apps will determine who goes where.
Posted by Evan Mayo at July 19th, 2009 at 11:12 amConsider this: yeah for verizon and their LTE network launch plans. However this launch will not be for every market just as sprint did not launch their 4g aka wi-max technology all at once. So while verizon customers are toggling between speeds of 20mb back down to 700kb, i see this crimping their device line-ups. meanwhile at&t will finish expanding their 3g coverage and with plans to launch hsdpa 7.2mb in markets while most 3g areas are at 1.2mb, i see this as a better move. gotta love gsm carriers. when at&t does launch LTE. i think its more manageable to go from 20mb to 7.2mb rather than 20mb to 700kb when its comes to speeds. at&t has continued to prove it carriers the best devices (not just iphones) and when verizon quits trying to have a hand in everything they might finally see the iphone. hopefully they wont be dumb to turn it down a 3rd time
Posted by Robby Ritter at October 26th, 2009 at 2:18 pm