Headline Feeds
Rumors about Verizon Wireless getting the iPhone resurfaced yet again Tuesday following a Bloomberg report claiming the carrier is set to become Apple's (Nasdaq: AAPL) second U.S. wireless provider in January. The report quoted unnamed sources.
If the rumor is true this time, AT&T (NYSE: T) could be in for a beating and Apple could see even higher iPhone sales figures.
Big Rumor Wheel Keeps On Turning
Tuesday's report was the latest in a string of rumors about Verizon and the iPhone almost since the original handset was first introduced.Support for Apple putting the iPhone on Verizon's network has been widespread.
On one side, analysts have long been urging Apple to add Verizon as a carrier in the United States because this could greatly boost device sales.
On the other side, some consumers who are unhappy with AT&T's wireless service have long been yearning for an iPhone on Verizon's network, which they perceive as more reliable than AT&T's. That desire for a sophisticated smartphone on a reliable carrier may be pushing many consumers to purchase Android smartphones running on Verizon's and Sprint's (NYSE: S) networks.
"Opening up multiple carriers for the iPhone wouldn't be good news for AT&T, but it would be great for consumers" Carl Howe, director, anywhere consumer research at the Yankee Group, told MacNewsWorld.
It's very likely that Verizon Wireless will get a CDMA iPhone early in 2011, if not in January, Brian Marshall, an analyst at Gleacher, told MacNewsWorld.
"A mosaic of industry checks, including component players; carrier data points and other factors all lead to an iPhone launch on Verizon Wireless in the first quarter of 2011" Marshall explained.
Define iPhone
Although neither Apple nor AT&T have publicly confirmed the duration of the contract or its expiration date, Engadget has located court documents stating the two signed a five-year exclusivity contract in 2007. However, it's unknown whether the terms of that agreement may have changed in the meantime.
"Apple's issue is how to thread the needle by introducing a device on Verizon that doesn't violate that agreement" the Yankee Group's Howe pointed out. "One way to do that would be to introduce a product that isn't identical to today's iconic iPhone and might be a completely separate product line."
A CDMA or LTE iPhone might fall far enough outside the terms of the contract that AT&T would not be able to sue Apple successfully, Howe said.
LTE, or Long-Term Evolution, is a next-generation wireless technology. Verizon will reportedly launch its LTE network in November in 25 cities throughout the United States.
The Big Chill for AT&T?
AT&T could be hit hard if Verizon does indeed get a smartphone from Apple.
"This will crush AT&T's postpaid net adds" Gleacher's Marshall said. "For example, in the March 2010 quarter, the iPhone accounted for 185 percent of AT&T's postpaid net adds."
That doesn't mean each iPhone sold accounts for nearly two new AT&T customers. "Take away the iPhone, and you'll see AT&T's losing postpaid net adds" Marshall explained. "Without the iPhone, more people are leaving AT&T than are coming into the network. The iPhone covers those losses and adds new customers on top of that. It's called the 'iPhone effect,' and it's powerful."
Retaining the iPhone effect is probably what drove AT&T to offer early upgrades for iPhone owners to the iPhone 4, Marshall speculated. When the new handset was first introduced, AT&T said some existing customers wouldn't have to wait to be offered an iPhone 4 at the fully subsidized prices of US$199 and $299.
"That was probably one of the smartest things AT&T has done" he told MacNewsWorld. "It's a pretty good deal, to lock up iPhone 4 sales before an iPhone comes to Verizon."
Those buyers won't be able to jump AT&T's ship and swim over to Verizon any time soon -- unless they're prepared to shell out big bucks in early termination fees.
"AT&T may be betting on the fact that buyers of the iPhone 4, including myself, now all have shiny, new two-year contracts," Howe pointed out.
"Those contracts will be nowhere close to over in January 2011," Howe added. "As a result, Verizon would have to wait until 2012 to poach today's iPhone 4 owners without their having to pay early termination fees."
Verizon did not respond to requests for comment by press time.
