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

Posted:
in iPhone edited January 2014
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.



«13456710

Comments

  • Reply 1 of 194
    teckstudteckstud Posts: 6,476member
    Apple is not going to Verizon in 2010. Next.
  • Reply 2 of 194
    aplnubaplnub Posts: 2,605member
    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...
  • Reply 3 of 194
    pmzpmz Posts: 3,433member
    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.
  • Reply 4 of 194
    irnchrizirnchriz Posts: 1,609member
    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.
  • Reply 5 of 194
    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.
  • Reply 6 of 194
    Forgive my ignorance, but why would the recent VZW / Moto/Droid deal would suggest that VZW would be unable to carry the iPhone?
  • Reply 7 of 194
    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.
  • Reply 8 of 194
    solipsismsolipsism Posts: 25,726member
    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 device?s user?s excessive usage.



    I?m 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 iDon?t ads are specifically Verizon attacking the iPhone?s limitations.
  • Reply 9 of 194
    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
  • Reply 10 of 194
    solipsismsolipsism Posts: 25,726member
    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?
  • Reply 11 of 194
    teckstudteckstud Posts: 6,476member
    Apple is a control freak and Verizon is a control freak. It ain't gonna happen.
  • Reply 12 of 194
    Meh. There is no proof of any of this at this point.
  • Reply 13 of 194
    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)
  • Reply 14 of 194
    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.
  • Reply 15 of 194
    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.
  • Reply 16 of 194
    solipsismsolipsism Posts: 25,726member
    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.
  • Reply 17 of 194
    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.
  • Reply 18 of 194
    anonymouseanonymouse Posts: 6,715member
    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.
  • Reply 19 of 194
    teckstudteckstud Posts: 6,476member
    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.
  • Reply 20 of 194
    kpluckkpluck Posts: 500member
    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
Sign In or Register to comment.