Yair Reiner of Oppenheimer cited a new report from Bloomberg this week, which cited two unnamed sources in reporting that a Verizon iPhone is expected to arrive from Apple in January of 2011. Such a move, which has been rumored for some time, would mark the end of iPhone exclusivity for rival wireless carrier AT&T.
But Reiner isn't completely sold on the prospect of a Verizon iPhone in early 2011. The analyst, in a note issued to investors Wednesday morning, noted that such rumors have surfaced numerous times.
"Similar speculation has emerged before, so barring independent confirmation or a press release from one of the parties, it'd be rash to pop the champagne," he wrote. "Still, it's worth considering the potential implications."
The impact for Apple would be huge, he believes, adding at least 12 million additional iPhone sales in the U.S. annually. That would amount to $7 billion in incremental revenue and more than $3 in incremental earnings per share.
"Many investors have mused about this upside, but few, we believe, have built it into their models or expectations," he said. "If this is real, it's big and it's incremental."
On AT&T alone, Apple over the last year sold 11 million iPhones to its 65 million postpaid install base of subscribers. Some of those subscribers who switched for the iPhone would inevitably move back to Verizon if Apple's handset became available on its network, Reiner said. But with Verizon's 83 million subscribers, Verizon would likely add at least 12 million net subscribers for Apple, and likely many more.
And from a strategic standpoint, Yainer said he believes it makes sense, as adding Verizon would "significantly blunt the competitive threat" from Google's Android mobile operating system. Since last year, Verizon has worked closely with Google to offer some of the best Android devices in an effort to compete with the iPhone. One new handset coming soon is Motorola's Droid X.
Weighing the possibilities of an Apple-Verizon deal, Reiner noted that AT&T made some subscribers eligible for an iPhone 4 upgrade long before their two-year contract was set to expire. He said it could have been a "last-ditch effort to lock them into new contracts before Verizon came aboard," or just the fear of a possible Verizon deal could have inspired AT&T.
On the other hand, he also noted that a January handset debut would run counter to the established iPhone refresh schedule, in which Apple introduces a new handset at its annual Worldwide Developers Conference in June.
"Would Verizon just get a CDMA version of the current iPhone 4? Would it get a new iPhone? Neither scenario makes much sense given that the iPhone just got a huge upgrade and that another isn't likely before mid-2011," he said.