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Apple predicted to sacrifice 'sweetheart' AT&T deal for Verizon

post #1 of 193
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If Apple ends its exclusive carrier agreement with AT&T next year, it will likely mark the end of its estimated $450 carrier subsidy for the iPhone, a new analysis has forecast.

In a new note to investors, analyst Brian Marshall with Broadpoint.AmTech said that the "sweetheart" carrier subsidy provided by AT&T for the iPhone would not be attainable with Verizon. He believes that the iPhone will be added to the Verizon network in the second half of 2010, but not without consequences.

A non-exclusive iPhone, Marshall forecast, would command roughly a $300 carrier subsidy. But he believes that any losses would be made up in volume, as Verizon is predicted to sell roughly 14 million iPhones in the 2011 calendar year. With an average selling price of around $500, that would be another $7 billion in revenue for Apple.

"While AAPL started off with exclusive arrangements in 2007 with the original iPhone launch, the company has since migrated towards multiple carriers per region," the note said. "In our view, diverse carrier support is a key element to driving global penetration of the iPhone (from ~3% share today of the total handset market). Therefore, we believe the chances are high the iPhone will find its way onto the VZ network in 2H10."

Marshall's assumption of 14 million Verizon iPhones is based on the performance Apple has had on AT&T's network. Within six quarters of the iPhone's launch, the handset has become 4 percent of AT&T's postpaid subscriber base.



In the September quarter alone, the iPhone was said to represent more than 90 percent of AT&T's total postpaid additions -- an increase from 57 percent from a year earlier, and 33 percent in September 2007. It is based on the strength of the iPhone that AT&T has posted subscriber gains on market leader Verizon, adding 2 million customers last quarter to Verizon's 1.2 million.

AT&T activated a record 3.2 million iPhones last quarter, of which nearly 40 percent were customers new to the wireless carrier. But CEO Ralph de la Vega also predicted that the iPhone will not remain exclusive to AT&T forever, though he believes his company's portfolio will remain strong after the device jumps to other carriers.
post #2 of 193
Apple is not going to Verizon in 2010. Next.
post #3 of 193
With Verizon and Moto's recent moves, the switch has to be at least 6 - 12 months out. Oh to be a fly on the wall sometimes...
Hard-Core.
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post #4 of 193
Guess this idiot lives in NYC. Apple is not abandoning AT&T, and neither are any customers with RollOver Minutes.

I know typical people blow the AT&T vs Verizon thing out of proportion, but for someone to suggest that Verizon will be selling iPhones ANY time soon, let alone 14 million in Calendar2011, is absolutely hilarious.

Not to mention wrong.
post #5 of 193
This was surely bound to happen at some point. Exclusive deals are fine when launching a product but will ultimately hurt sales growth over time.
post #6 of 193
Quote:
Originally Posted by pmz View Post

Apple is not abandoning AT&T, and neither are any customers with RollOver Minutes.

Apple will inevitably abandon AT&T, because they're a poor partner, they consistently disappoint Apple's customers and making the carriers compete with one another directly will lead to lower plan prices and make the iphone more affordable.

And roll-over minutes are not going to keep any customer that just wants a network that works.
post #7 of 193
Forgive my ignorance, but why would the recent VZW / Moto/Droid deal would suggest that VZW would be unable to carry the iPhone?
post #8 of 193
Apple said on the conference call that price it receives on iPhones didn't change when exclusivity ended in other countries, and wouldn't change when more agreements end. If Apple wants $600, then carrier can take it or leave it, price is what it is. And if Verizon only wanted to subsidize the phone by $300 instead for $400, then it will just have to charge $300 while AT&T offers it for $200.

Second, iPhone didn't attract 90% of AT&T's new postpaid customers, it attracted about 1.28M, or 34%.

3.6M signed up and 2.4M subs left AT&T, for a net of 1.4M adds.
Making a comparison on net adds is totally flawed because of churn. It's gross additions that is correct way to look at iPhone's contribution to subscriber growth.
post #9 of 193
Quote:
Originally Posted by Roc Ingersol View Post

Apple will inevitably abandon AT&T, because they're a poor partner, they consistently disappoint Apple's customers and making the carriers compete with one another directly will lead to lower plan prices and make the iphone more affordable.

And roll-over minutes are not going to keep any customer that just wants a network that works.

Explain that to me. Why would Apple stop selling a GSM phone in the US? Seems pretty silly to pack up from AT&T to go exclusively with Verizon. What makes sense is adding a carrier to the US market after 3 years of excessive growth especially on a network that is now already bogged down by your devices users excessive usage.

Im not sure if Apple would be willing to sacrifice as much profit per unit as the article says, but eventually you have to expand once you get to a saturation point or you stagnant.


Quote:
Originally Posted by djbeta View Post

Forgive my ignorance, but why would the recent VZW / Moto/Droid deal would suggest that VZW would be unable to carry the iPhone?

Their iDont ads are specifically Verizon attacking the iPhones limitations.
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post #10 of 193
I really don't see how Apple is going to continue to lure people away from other carriers to AT&T when Verizon clearly has far better 3G coverage. IF Apple does allow the iPhone to be sold on Verizon, I foresee Verizon offering subsidies to try and lure people back from AT&T. If that is the case, then I don't see how AT&T could compete in selling the iPhone without offering its own subsidies? It just doesn't make sense, but then again, neither does selling the iPhone on just one carrier when it could sell them on EVERY carrier (which is likely to happen anyway once Congress forces the carriers to do away with the exclusivity deals). Imagine the room to grow the iPhone if people didn't have to break contracts or leave carriers that they were satisfied with. It only makes sense.
-360
post #11 of 193
Quote:
Originally Posted by Turley Muller View Post

Second, iPhone didn't attract 90% of AT&T's new postpaid customers, it attracted about 1.28M, or 34%.

3.6M signed up and 2.4M subs left AT&T, for a net of 1.4M adds.

Are those numbers in millions for only postpaid, or both post and pre?
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post #12 of 193
Apple is a control freak and Verizon is a control freak. It ain't gonna happen.
post #13 of 193
Meh. There is no proof of any of this at this point.

Proud AAPL stock owner.

 

GOA

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GOA

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post #14 of 193
Quote:
Originally Posted by solipsism View Post

those numbers in millions are only for postpaid, and not for both post and pre?

Postpaid subs is the number you want to look at. Total Gross adds were 5.4M, churn 3.$M, net adds 2.0M. Verizon added ~950K postpaid subs (net)
post #15 of 193
Quote:
Originally Posted by Turley Muller View Post


Second, iPhone didn't attract 90% of AT&T's new postpaid customers, it attracted about 1.28M, or 34%.

3.6M signed up and 2.4M subs left AT&T, for a net of 1.4M adds.
Making a comparison on net adds is totally flawed because of churn. It's gross additions that is correct way to look at iPhone's contribution to subscriber growth.

Look at it anyway you want, just as long as it's consistent and comparable. For example, and these numbers are entirely hypothetical -

VZ signs up 100,000 BB Storm customers.
VZ adds a net subscriber growth of 1mm customers
Then you could say 10% of VZ's new postpaid customers were Storms.

However you want to define the metric is fine - it's just that - a metric.
post #16 of 193
How about this scenario. Apple builds a phone that works with one type of cellular technology. They go with the one most popular across the world (not that it is the best) because that gives them the greatest pool from which to sell their phone. Verizon does not use that technology. Why would Apple manufacture another type of phone just to pick up one or two other carriers. Especially when Verizon has already said they are migrating to the system that Apple is already on (albeit the next generation of that system). Don't forget, Apple sells a lot of phones in their stores. Can you imagine the nightmare of trying to keep inventory straight for 5 models for multiple carriers? Verizon will have the opportunity to sell the iPhone when their network matches up with the network that Apple feels gives them the best opportunity to sell phones not until.
post #17 of 193
Quote:
Originally Posted by Egocentric View Post

...neither does selling the iPhone on just one carrier when it could sell them on EVERY carrier (which is likely to happen anyway once Congress forces the carriers to do away with the exclusivity deals). Imagine the room to grow the iPhone if people didn't have to break contracts or leave carriers that they were satisfied with. It only makes sense.

Are you also suggesting that vendors will be required to make multiple versions of their phones to work on GSM/WCDMA, CDMA/CDAM2000, and T-Mobile’s wonky WCDMA? Or be required to use the larger, more expensive and less power efficient components that have both CDMA and GSM? If we’re talking about legislation then anything is possible, but it doesn’t make sense until LTE is well saturated on all carries through the US, which may mean legislation to require LTE for all carriers.
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post #18 of 193
Quote:
Originally Posted by Egocentric View Post

I really don't see how Apple is going to continue to lure people away from other carriers to AT&T when Verizon clearly has far better 3G coverage.

Wrong. My AT&T 3G coverage is excellent, almost everywhere I go. As much recognition as Apple gets for their marketing, Verizon deserves a lot of credit for convincing people their network is, as a matter of indisputable fact, superior to AT&T.
post #19 of 193
Quote:
Originally Posted by Turley Muller View Post

Apple said on the conference call that price it receives on iPhones didn't change when exclusivity ended in other countries, and wouldn't change when more agreements end. If Apple wants $600, then carrier can take it or leave it, price is what it is. And if Verizon only wanted to subsidize the phone by $300 instead for $400, then it will just have to charge $300 while AT&T offers it for $200.

Yes, this is the surest sign that this "analysis" is bunk. The iPhone is the phone everyone wants (see yesterdays AI article on iPhone gains against Blackberry) and the carriers aren't going to be able to dictate the subsidy.
post #20 of 193
Quote:
Originally Posted by AppleStud View Post

Wrong. My AT&T 3G coverage is excellent, almost everywhere I go. As much recognition as Apple gets for their marketing, Verizon deserves a lot of credit for convincing people their network is, as a matter of fact, superior to AT&T.

It is superior- FACT.
and Verizon's had nothing to do with that. Consumers and tech reviewers everywhere have stated and documented it over and over and over.
Maybe yours works for you in AppleLand but facts are facts and nothing but.
post #21 of 193
From what I have read, Apple is having a little trouble meeting worldwide demand for the iPhone. Production capability just isn't there. So what are they going to do if they add another carrier in the US increase demand even more?

No new carriers will be added in the US until at least 2011. Maybe 2012.

I suppose a tablet device would be a different story but the iPhone is staying with AT&T for awhile.

-kpluck

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post #22 of 193
Quote:
Originally Posted by teckstud View Post

It is superior- FACT.
and Verizon's had nothing to do with that. Consumers and tech reviewers everywhere have stated and documented it over and over and over.
Maybe yours works for you in AppleLand but facts are facts and nothing but.

well, 82 million US subscribers must think it's good enough to use. Get over it.

ps - the average consumer doesn't read tech reviews - they watch TV, where they are bombarded with "it's the network" and "there's a map for that" advertising - so, yes, verizon certainaly has something to do with that.
post #23 of 193
Apple already has stated several times it doesn't see any sense in investing in making a CDMA network handset because nearly the whole world is on GSM and CDMA is nearing end of life. Verizon is moving to LTE, a next generation GSM standard. That won't probably happen until 2011.

I see the iPhone going to T-Mobile for Verizon or Sprint. Apple & AT&T never expected exclusivity to last forever. Apple wanted an exclusive partner so both would work to together in innovating ne services such as visual voicemail and App store etc. Since AT&T was GSM, it made sense to build a GSM iphone because it works on 95% of the worlds networks
post #24 of 193
Quote:
Originally Posted by AppleStud View Post

Wrong. My AT&T 3G coverage is excellent, almost everywhere I go. As much recognition as Apple gets for their marketing, Verizon deserves a lot of credit for convincing people their network is, as a matter of indisputable fact, superior to AT&T.

In several key aspects Verizons network is better than AT&T. Some of it due to the companies themselves, while in other ways its the underlying technology difference. That said, AT&T and the network also have their pluses, its not an all or nothing situation as some want to believe.
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post #25 of 193
"I really don't see how Apple is going to continue to lure people away from other carriers to AT&T when Verizon clearly has far better 3G coverage."

Spoken as either a New Yorker or San Franciscan. Coverage is already more than adequate for the vast majority of AT&T customers. They're working on fixing those two urban cores that have crappy service. The rest of us don't really see why we should pay Verizon's higher fees. We don't see any additional benefit.
post #26 of 193
Quote:
Originally Posted by AppleStud View Post

well, 82 million US subscribers must think it's good enough to use. Get over it.

ps - the average consumer doesn't read tech reviews - they watch TV, where they are bombarded with "it's the network" and "there's a map for that" advertising - so, yes, verizon certainaly has something to do with that.

Get over what- your misinformation? Gladly.
This didn't just happen and consumers actually communicate with each other and are actually smarter that you think. And as for being bombarded with advertising- what's your excuse for "I'm a Mac, I'm a PC" ads yet only 10% marketshare.
post #27 of 193
Quote:
Originally Posted by Egocentric View Post

...which is likely to happen anyway once Congress forces the carriers to do away with the exclusivity deals.

Congress can't force Apple to make a CDMA based iPhone though, so even without exclusivity deals, hardware manufacturers can still target the carriers they want. Lets face it, until LTE networks go global, Apple is unlikely to make an iPhone that will work on Verizon's network. 2011 at the earliest...
post #28 of 193
Quote:
Originally Posted by teckstud View Post

what's your excuse for "I'm a Mac, I'm a PC" ads yet only 10% marketshare.

Premium product in a Premium market sector. Sales on margin rather than volume. High demand + high price. This is a deliberate strategy by Apple.

Pretty simple economics, Teck.
post #29 of 193
Quote:
Originally Posted by teckstud View Post

Get over what- your misinformation? Gladly.
This didn't just happen and consumers actually communicate with each other and are actually smarter that you think. And as for being bombarded with advertising- what's your excuse for "I'm a Mac, I'm a PC" ads yet only 10% marketshare.

What misinformation? I have no problem with my iPhone 3G. AT&T has 80million subscribers - are they all masochists who choose to suffer with crappy service for the heck of it? Sorry if New York and San Fran suck, that's inexcusable on AT&Ts part. However, the vast majority of people are satisfied with their AT&T service. The iPhone is only 4% of their post-paid customer base - what are the other 96% of people doing wasting their time on a "crap" network?

What's my excuse for Get a Mac ads and only 10% market share? Well, what was market share before the get a mac ads? 3%? 4%? I'll take a 250-300% growth in market share if i'm Apple.
post #30 of 193
Quote:
Originally Posted by Quadra 610 View Post

Premium product in a Premium market sector. Sales on margin rather than volume. High demand + high price. This is a deliberate strategy by Apple.

Pretty simple economics, Teck.

So everybody who's seen the ads that can't afford an Apple walks into a store, shakes their head, and then walks away? YEAH RIGHT? Wanna buy the Brooklyn Bridge? Simple transaction Quad, really.
post #31 of 193
Quote:
Originally Posted by Quadra 610 View Post

Premium product in a Premium market sector. Sales on margin rather than volume. High demand + high price. This is a deliberate strategy by Apple.

Pretty simple economics, Teck.

why would you bother using such logic with teckdud?
post #32 of 193
Quote:
Originally Posted by AppleStud View Post

What misinformation? I have no problem with my iPhone 3G. AT&T has 80million subscribers - are they all masochists who choose to suffer with crappy service for the heck of it? Sorry if New York and San Fran suck, that's inexcusable on AT&Ts part. However, the vast majority of people are satisfied with their AT&T service. The iPhone is only 4% of their post-paid customer base - what are the other 96% of people doing wasting their time on a "crap" network?

What's my excuse for Get a Mac ads and only 10% market share? Well, what was market share before the get a mac ads? 3%? 4%? I'll take a 250-300% growth in market share if i'm Apple.

Again you're wrong , the share was 7-8%. Stop distorting things. Yeesh!
post #33 of 193
Quote:
Originally Posted by AppleStud View Post

why would you bother using such logic with teckdud?

Oh here we go- personal attacks. Love it. You loose the debate and resort to that. Typical.
post #34 of 193
Verizon however says nothing about the speed of their 3G network. AT&T has a faster 3G network and its getting faster every year.


Quote:
Originally Posted by Egocentric View Post

I really don't see how Apple is going to continue to lure people away from other carriers to AT&T when Verizon clearly has far better 3G coverage.
post #35 of 193
I agree with the "Apple is a control freak, Verizon is a control freak" it won't work because neither of them will bow down to the other.

I used to be a Verizon customer and loved their coverage. Now that I have been on ATT for a couple of years I am happy with less coverage but more freedom and a consistent bill. My bill is the same every month. On Verizon, it was a guessing game and they could never answer why it was changing.

If Verizon picks up the iPhone after releasing the iDon't commercial, it would basically make them hypocrites. How can they bash something that they want so bad unless they can't get it. My guess is that there were negotiations and Verizon got their feelings hurt over control issues. They lost the iPhone once (in the beginning) and they have lost it again.

Last, why would Apple make an iPhone to work on Verizon's network when a majority of the world uses GSM? Kind of a no brainer. Verizon needs to join the rest of the world so they can play well with others.
post #36 of 193
Quote:
Originally Posted by TenoBell View Post

Verizon however says nothing about the speed of their 3G network. AT&T has a faster 3G network and its getting faster every year.

What about dropped calls? static calls?
post #37 of 193
If this does end up happening (iPhone coming to Verizon) I just hope it won't crap out my already great service!
post #38 of 193
Quote:
Originally Posted by anonymouse View Post

Yes, this is the surest sign that this "analysis" is bunk. The iPhone is the phone everyone wants (see yesterdays AI article on iPhone gains against Blackberry) and the carriers aren't going to be able to dictate the subsidy.

Exactly! End of discussion!
post #39 of 193
Quote:
Originally Posted by iancass79 View Post

I agree with the "Apple is a control freak, Verizon is a control freak" it won't work because neither of them will bow down to the other.

I used to be a Verizon customer and loved their coverage. Now that I have been on ATT for a couple of years I am happy with less coverage but more freedom and a consistent bill. My bill is the same every month. On Verizon, it was a guessing game and they could never answer why it was changing.

If Verizon picks up the iPhone after releasing the iDon't commercial, it would basically make them hypocrites. How can they bash something that they want so bad unless they can't get it. My guess is that there were negotiations and Verizon got their feelings hurt over control issues. They lost the iPhone once (in the beginning) and they have lost it again.

Last, why would Apple make an iPhone to work on Verizon's network when a majority of the world uses GSM? Kind of a no brainer. Verizon needs to join the rest of the world so they can play well with others.

Great post. Thanks- we've both been there.
post #40 of 193
Quote:
Originally Posted by teckstud View Post

Oh here we go- personal attacks. Love it. You loose the debate and resort to that. Typical.

Right and telling people they're fanbois and to go drink their Koolatra brews is so above that

By the way learn how to spell lose.
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