In a note to investors released this week, Doug Reid of Thomas Weisel Partners said his firm believes that T-Mobile, and not Verizon, will be the beneficiary when Apple's exclusive agreement with AT&T expires next year. AT&T has likely realized this, he said, and has changed its advertising focus accordingly to be less focused on the iPhone.
"AT&T advertising in the United States has in recent weeks clearly shifted away from iPhone as the carrier likely readies itself to lose exclusivity in the United States (to T-Mobile and not to VZ, we believe) while VZ ads promoting Droid and other anti-iPhone devices appear to have intensified markedly," Reid said.
AT&T's exclusive contract with Apple for the iPhone is due to expire in 2010. While earlier this year there were reports that the wireless carrier was pushing to extend the agreement through 2011, those rumors have since cooled.
While the iPhone in its current iteration is compatible with T-Mobile's network, it is not capable of connecting to its high-speed 3G network, which operates on a unique 1700MHz spectrum. The iPhone is currently compatible with UMTS/HSDPA 3G connections at the frequencies 850MHz, 1900MHz and 2100MHz. It would be necessary, therefore, for Apple to build a new hardware model that supports T-Mobile's 3G frequency.
Those changes, though, are relatively minor compared to what would be necessary to make the iPhone compatible with Verizon's CDMA network -- a technology that, unlike the GSM network of AT&T and T-Mobile, is not widely used abroad. Recent rumors have suggested Apple could enter a deal with chip maker Qualcomm. While Qualcomm plans to have a dual-mode chip that would allow connection to both AT&T and Verizon available in 2010, some have said the new chip would be too cost prohibitive for Apple to adopt so soon.
AT&T's advertisements featuring actor Luke Wilson have focused on coverage area and network performance, rather than handsets. Apple recently, however, did join the discussion with a pair of ads that highlight the ability of the iPhone to handle calls and data at the same time -- a capability available on AT&T's network, but not from competitor Verizon.
Thomas Weisel Partners have set a price target of $245 for AAPL stock. They expect that 8.2 million iPhones will be sold in the December quarter, along with 20.45 million iPods and 3.06 million Macs. If those numbers prove accurate, it would top Apple's September 2009 quarter -- its best ever -- when the company sold 3 million Macs and 7.4 million iPhones to earn $1.67 billion in profit.