A Verizon-iPhone Deal? Analyst Says “Chances High”
by John Paczkowski
Posted on October 28, 2009 at 9:59 AM PT
Apple has a lot to gain by ending iPhone carrier exclusivity in the U.S. and signing up Verizon as a second carrier partner. As I’ve noted here before, such a deal could more than double U.S. iPhone sales in the near term. That said, it does have some noteworthy downsides, top among them, the end of the estimated $450-per-iPhone carrier subsidy AT&T (T) has been paying.
That’s the word from Broadpoint AmTech analyst Brian Marshall, who believes Apple (AAPL) will bring the iPhone to Verizon (VZ) in the second half of 2010 and forfeit AT&T’s “sweetheart” carrier subsidy as a result.
“While [Apple] started off with exclusive arrangements in 2007 with the original iPhone launch, the company has since migrated towards multiple carriers per region,” Marshall wrote in a note to investors. “In our view, diverse carrier support is a key element to driving global penetration of the iPhone. Therefore, we believe the chances are high the iPhone will find its way onto the [Verizon] network in 2H10.”
Of course, should things play out that way, the iPhone will no longer be the powerful subscriber-retention tool it is today. And Marshall believes that will lower the subsidy it commands from an estimated $450 to around $300.
This might seem to imply a nasty hit to Apple’s bottom line, but Marshall figures any losses Apple might suffer would be more than made up in volume. He sees Verizon selling roughly 14 million iPhones in the 2011 calendar year. And with an average selling price of $500, that’s another $7 billion in revenue for Apple.
Comments
iPhone 3G: standard phone
Verizon 3G: proprietary networking
iPhone 4G: standard phone
Verizon 4G: standard networking
So getting at Verizon customers during 3G involves a ton of work and risk for Apple, as well as consumer confusion with 2 incompatible US iPhones that function differently, while getting at Verizon customers during 4G involves no work, no risk, no consumer confusion. Guess which one Apple is going to do?
Also note that Apple has already waited 3 years for Verizon customers, and 4G is 1-2 years away. If Apple were doing a proprietary iPhone 3G for Verizon, they would have already done it.
Posted by Fred Hamranhansenhansen at October 28th, 2009 at 3:45 pmI agree with Fred. Apple will wait until 4G (LTE) rollout is complete in 2-3 years before moving to Verizon (if ever). To build a new CDMA version of the phone before 4G is ready doesn’t make sense. Also, Verizon had the ability to grab the iPhone long before AT&T picked it up. After Verizon bad mouthed Apple to the public, why would Apple want to give its crown jewel to Verizon in exchange for a lower subsidy. T-mobile would be a better fitting partner (along with AT&T) and Apple already does business with them in Germany.
Posted by Doug Kaufman at October 29th, 2009 at 12:48 am