Apple to End AT&T iPhone Exclusivity Within a Year?
by John Paczkowski
Posted on August 31, 2009 at 8:21 AM PT
Another point worth pulling out from Piper Jaffray analyst Gene Munster’s recent research note about Apple, this one regarding AT&T’s iPhone-exclusivity deal: Munster doesn’t see it lasting much beyond this year. Apple (AAPL) is slowly transitioning the countries in which it sells the iPhone to a multicarrier model and the United States is at the top of its list.
“We expect Apple to add new iPhone carriers in the U.S. within the next year (likely with a new product launch next summer), Munster writes. “By way of example, for various reasons the company moved from an exclusive relationship with French wireless carrier Orange to a multi-carrier model. In France, the company now enjoys dramatically higher market share (in the 40% range vs. about 15% in ROW) than in countries with exclusive carrier agreements (such as AT&T in the U.S. where the iPhone has market share in the mid-teens). We believe Apple is seeing the increased unit sell-through more than offset the slightly (~10%) deteriorated economics per unit involved in non-exclusive agreements.”
If Munster’s prediction proves true, it will undoubtedly be welcomed by iPhone owners–nearly a third of whom listed AT&T as the feature they dislike most in the iPhone in a recent ChangeWave survey. But it will be ugly news for AT&T (T), which could suffer some serious subscriber defections if the company loses its iPhone-exclusivity deal–particularly if Apple signs on Verizon (VZ) as a second carrier. As Pali Research recently noted:
“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. 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.”
Comments
I’d pay to end my AT&T contract, and I’m only two months into it.
Any comment thread that rains on AT&T brings out people who have no trouble getting a signal. I’ve experienced that too. Miami for example – wherever I went I had full 3G bars. But it doesn’t matter that some people have good service. While we’re all happy for you the case has clearly been made that AT&T has some serious problems.
Here in Charlotte, admittedly a smaller market, the service is poor. The Wachovia Center tower can receive a strong 3G signal, but I’m usually pushed down to Edge. That’s a simple matter of AT&T not adding the capacity, not a shortcoming of the signal penetration strength. With two large AT&T buildings VERY nearby it’s hard to explain the shortcoming.
Five miles outside Charlotte near the city’s busiest mall there are many dead zones where AT&T has zero signal – in stark contrast with their coverage maps.
Considering how long the 3G networks have been around it’s hard to see AT&T fixing many markets. They seem more resigned to taking the abuse all over the press, and just ignoring their 3G shortcomings. It’s time to pour money into the next generation of radios, so why dwell on the past?
AT&T doesn’t have to fix their 3G problems because iPhone customers are so devoted to the platform that they’ll compromise on their network demands.
That compromise is a hard thing for some users though. The iPhone and a proper 3G network can deliver all kinds of content: streaming podcasts, the NPR app, Pandora. Those services are why some are willing to pay $30 a month for data. And as great as those services are they’re useless when AT&T doesn’t hold up their end of the bargain.
I love my iPhone in Miami. In Charlotte it’s about half as good.
Posted by Brendan Walsh at August 31st, 2009 at 8:51 amIt’s unfortunate that AT&T doesn’t seem to take the widespread criticism of their network seriously. Their backhaul issues will be their undoing – one would expect a pretty healthy churn rate once Verizon signs a deal with Apple. I only hope that Verizon is doing the legwork NOW to upgrade their network (3G and 4G) so that their customers won’t have to experience the same shoddy service that folks currently get from AT&T. History says that the wireless carriers don’t do much to stay ahead of the curve, however, so I am not holding my breath.
Posted by Danny Miller at August 31st, 2009 at 9:00 amThere are just as many Verizon subscribers unhappy with their signal quality. Another point is, there are tons of smartphones that can do everything the iPhone can.
Posted by Michael Morrone at August 31st, 2009 at 10:50 am@ Michael Morrone
Tons? Maybe there are other phones, but it doesn’t matter. The development community has chosen the iPhone as the mobile platform to develop for, decidedly. Everyone else starts in the hole. A big hole.
So while you might like Smartphone X you won’t be able to get Application Z for it.
AT&T critics have been far more vocal than Verizon critics. Maybe it’s because iPhone gets all the press. Regardless, having a choice would be beneficial as people know which works better for their region.
Posted by Brendan Walsh at August 31st, 2009 at 11:22 amYou know what I’d like to see?
Whenever there’s an article “[Analyst/Journalist] says X about Company Y”, the article should link to a scorecard of all the claims that analyst has made about the company in the last year, with big ticks and crosses next to the ones they got right and wrong.
This would be especially valuable with Apple news, where there is an entire industry built around presenting sketchily sourced rumours and analyst “well obviously they’re doing this” as fact.
Posted by Charles Miller at September 1st, 2009 at 4:11 pm