Report: Verizon expected to eat up AT&T iPhone sales, add 14%
Piper Jaffray analyst Gene Munster expects Apple to sell just 2.5 million additional iPhones in the US by adding Verizon as a carrier early next year, bringing 2011's US iPhone sales to 20 million, with Verizon's sales largely coming at the expense of AT&T.
In a research note provided to AppleInsider, Munster wrote that his firm's numbers have "baked in" the assumption that Apple will release the iPhone on Verizon in early to mid 2011, currently modeled by Piper Jaffray to occur midway through the March quarter.
Given AT&T's 5.2 million iPhones sold in the third quarter 2010, which Piper Jaffray estimated to be 80 percent of all of AT&T's smartphones sold, Munster said the iPhone "has found continued success despite increased competition in the smartphone category and grew 65 percent year over year at AT&T" in that most recent quarter.
Munster believes he is conservatively modeling iPhone sales at Verizon to assume that the iPhone will make up a smaller proportion of that carrier's smartphone mix than it does at AT&T. The firm estimates Verizon will sell about 25 million smartphones in 2011, and that just 36 percent, or 9 million, will be iPhones.
Munster expects the majority of those Verizon iPhones to be switchers from AT&T, suggesting that the addition of Verizon will only result in 2.5 million more US iPhones sold in 2011, or roughly 14 percent more than Apple could sell at AT&T alone.
The report models AT&T selling 17.5 million iPhones next year were it to have no competition with Verizon; with both carriers selling iPhones, Munster believes AT&T will sell 11 million and Verizon will sell 9 million. He also notes that these figures "may be conservative."
This calendar year, AT&T is expected to have sold 15.6 million iPhones, or 34 percent of those sold globally. With Munster's projection of sales cannibalization from Verizon, AT&T's estimated 11 million iPhone sales would reduce it to being just 17 percent of worldwide iPhone units. Global sales of the iPhone are expected to grow from this year's 46.3 million total to 63 million in 2011.
In 2012, Munster estimates Apple will sell a total of 78.3 million iPhones, with AT&T and Verizon both selling around 14 million each, for equal 18 percent shares of the worldwide figure.
Conservative estimates for Verizon's iPhone
Other analysts have provided an even weaker outlook for a Verizon iPhone launch, according to a recent report by Philip Elmer-DeWitt of Fortune.
That report noted that BMO Capital Markets estimates Apple would only sell 8 million iPhones with Verizon, while Barclays Capital's James Ratcliffe predicted 9 million, and Merrill Lynch's Scott Craig estimated sales of "at least ten million units at Verizon." Stifel Nicolaus' Doug Reid thinks Apple will only sell less than a million more iPhones in total by partnering with Verizon next year.
Craig at Merrill Lynch did note that Apple has seen much better results in other markets where it has expanded beyond exclusivity with a single carrier. "Historically, when the iPhone has been added to a second carrier in a country (France, Norway, Canada, UK, etc)," Craig wrote, "iPhone shipments increased nearly 1:1 with subscriber base, indicating minimal/no share loss at the incumbent carrier. We are more conservative in our estimates, given the more recent increased competition from Android devices and some likely cannibalization at AT&T."
Recent sales reports have indicated that Verizon's faith in Android has weakened significantly since the launch of iPhone 4. AT&T has retained the ability to sell 2.5 times as many iPhones as Verizon could sell Android phones over the same period, despite Verizon having better 3G coverage in many key markets and a wide selection of Android models.
In 2009, Verizon made a dramatic shift from RIM's BlackBerry to Android after RIM failed to deliver popular new smartphones that could drive sales growth comparable to the iPhone. Verizon sells significantly fewer smartphones than AT&T, despite having a slight lead in the total number of subscribers.
If the iPhone is able to enhance Verizon's proportion of smartphones sold, it could prove disastrous for Android on a scale similar to that seen by RIM, which slipped from being nearly 90 percent of Verizon's smartphone mix to less than 20 percent in the last year. Additionally, the more iPhones Verizon can sell as upgrades to existing feature phone users, the less cannibalization AT&T is likely to suffer from network switchers.
In a research note provided to AppleInsider, Munster wrote that his firm's numbers have "baked in" the assumption that Apple will release the iPhone on Verizon in early to mid 2011, currently modeled by Piper Jaffray to occur midway through the March quarter.
Given AT&T's 5.2 million iPhones sold in the third quarter 2010, which Piper Jaffray estimated to be 80 percent of all of AT&T's smartphones sold, Munster said the iPhone "has found continued success despite increased competition in the smartphone category and grew 65 percent year over year at AT&T" in that most recent quarter.
Munster believes he is conservatively modeling iPhone sales at Verizon to assume that the iPhone will make up a smaller proportion of that carrier's smartphone mix than it does at AT&T. The firm estimates Verizon will sell about 25 million smartphones in 2011, and that just 36 percent, or 9 million, will be iPhones.
Munster expects the majority of those Verizon iPhones to be switchers from AT&T, suggesting that the addition of Verizon will only result in 2.5 million more US iPhones sold in 2011, or roughly 14 percent more than Apple could sell at AT&T alone.
The report models AT&T selling 17.5 million iPhones next year were it to have no competition with Verizon; with both carriers selling iPhones, Munster believes AT&T will sell 11 million and Verizon will sell 9 million. He also notes that these figures "may be conservative."
This calendar year, AT&T is expected to have sold 15.6 million iPhones, or 34 percent of those sold globally. With Munster's projection of sales cannibalization from Verizon, AT&T's estimated 11 million iPhone sales would reduce it to being just 17 percent of worldwide iPhone units. Global sales of the iPhone are expected to grow from this year's 46.3 million total to 63 million in 2011.
In 2012, Munster estimates Apple will sell a total of 78.3 million iPhones, with AT&T and Verizon both selling around 14 million each, for equal 18 percent shares of the worldwide figure.
Conservative estimates for Verizon's iPhone
Other analysts have provided an even weaker outlook for a Verizon iPhone launch, according to a recent report by Philip Elmer-DeWitt of Fortune.
That report noted that BMO Capital Markets estimates Apple would only sell 8 million iPhones with Verizon, while Barclays Capital's James Ratcliffe predicted 9 million, and Merrill Lynch's Scott Craig estimated sales of "at least ten million units at Verizon." Stifel Nicolaus' Doug Reid thinks Apple will only sell less than a million more iPhones in total by partnering with Verizon next year.
Craig at Merrill Lynch did note that Apple has seen much better results in other markets where it has expanded beyond exclusivity with a single carrier. "Historically, when the iPhone has been added to a second carrier in a country (France, Norway, Canada, UK, etc)," Craig wrote, "iPhone shipments increased nearly 1:1 with subscriber base, indicating minimal/no share loss at the incumbent carrier. We are more conservative in our estimates, given the more recent increased competition from Android devices and some likely cannibalization at AT&T."
Recent sales reports have indicated that Verizon's faith in Android has weakened significantly since the launch of iPhone 4. AT&T has retained the ability to sell 2.5 times as many iPhones as Verizon could sell Android phones over the same period, despite Verizon having better 3G coverage in many key markets and a wide selection of Android models.
In 2009, Verizon made a dramatic shift from RIM's BlackBerry to Android after RIM failed to deliver popular new smartphones that could drive sales growth comparable to the iPhone. Verizon sells significantly fewer smartphones than AT&T, despite having a slight lead in the total number of subscribers.
If the iPhone is able to enhance Verizon's proportion of smartphones sold, it could prove disastrous for Android on a scale similar to that seen by RIM, which slipped from being nearly 90 percent of Verizon's smartphone mix to less than 20 percent in the last year. Additionally, the more iPhones Verizon can sell as upgrades to existing feature phone users, the less cannibalization AT&T is likely to suffer from network switchers.
Comments
If Verizon's network can handle the flood of first week switchers?if there aren't activation server problems, if there aren't suddenly a bunch of dropped calls on Verizon, etc.?then I think the higher figure is likely.
If, on the other hand, initial reports indicate there isn't really much reason to switch, then I think you can discount a huge number of switchers and have to rely on iPhone virgins who have just been locked into Verizon for a long time. This is not an insubstantial number of people, and a better subsidy could help with that.
Also, I have no reason to believe there will be any problems with Verizon. It seems to handle the smartphone traffic it has now and I strongly doubt the availability of the iPhone on Verizon will create the same proportional spike in data traffic that iPhone did on AT&T.
But, if it is an issue, it could cause this to fizzle.
Here's what it will come down to:
If Verizon's network can handle the flood of first week switchers?if there aren't activation server problems, if there aren't suddenly a bunch of dropped calls on Verizon, etc.?then I think the higher figure is likely.
I'm not so sure about this as a major factor. It seems that the ever increasing sales on AT&T despite the constant din of reports of dropped calls, poor service and activation issues show that when people have their mind set on a particular phone, they get that phone (provided it is available on their carrier of choice).
If, on the other hand, initial reports indicate there isn't really much reason to switch, then I think you can discount a huge number of switchers and have to rely on iPhone virgins who have just been locked into Verizon for a long time. This is not an insubstantial number of people, and a better subsidy could help with that.
I have to agree with you on the "iPhone virgins" thought. I'm not sure why these analysts are so pessimistic on new Verizon sales. My (purely anecdotal) observations have shown that there are TONS of Verizon subscribers interested in the iPhone.
Being a big fan, I often toss out to people "you should get an iPhone" whenever my phone comes into the conversation. I can't count how many times I have heard "but I have Verizon" or "I wish, but my family is on Verizon" or (lately) "next year when Verizon sells it!"
Granted, I am in the NYC metro area where I have heard AT&T is particularly sketchy--though I have very few problems--so maybe these sentiments are not representative of the country as a whole. Nevertheless, I expect huge "virgin" demand when/if the iPhone comes to Verizon this year.
Also, I have no reason to believe there will be any problems with Verizon. It seems to handle the smartphone traffic it has now and I strongly doubt the availability of the iPhone on Verizon will create the same proportional spike in data traffic that iPhone did on AT&T.
But, if it is an issue, it could cause this to fizzle.
one sure way to find out...
OR
Industry analyst spout gibberish about potential Verizon iPhone sales.
OR
Analyst refer to magic 8 ball regarding potential Verizon iPhone sales numbers.
Meh, sorry for my snooty wasted comment, IMO the article did not convey any real information or news except for the lack of consensus of projected Verizon iPhone sales. I'll go back to sleep now.
Although I might be proven wrong I doubt Apple would invest in CDMA, most of the planet uses GSM and they can't build enough iPhone 4's as it is, let alone muddying the waters with another handset to manufacture.
I'm sure that Verizon has some advantages for certain area's of the US in terms of coverage etc and I know Americans love to make their own standard rather than run with the rest of the planet (Pal VS NTSC etc etc) but overall it makes sense for Apple to maintain the GSM standard and expend to T-Mobile in the US and to other international countries.
On CDMA, much of China and Brazil use CDMA. Two huge markets. Further, it doesn't make sense for Apple to go to Verizon unless it is incorporating as much of Verizon's subscriber base as possible.
Considering that there is no offical confirmation of an iPhone using any other technology than GSM I don't see how these figures have any relevance at all.
Although I might be proven wrong I doubt Apple would invest in CDMA, most of the planet uses GSM and they can't build enough iPhone 4's as it is, let alone muddying the waters with another handset to manufacture.
I'm sure that Verizon has some advantages for certain area's of the US in terms of coverage etc and I know Americans love to make their own standard rather than run with the rest of the planet (Pal VS NTSC etc etc) but overall it makes sense for Apple to maintain the GSM standard and expend to T-Mobile in the US and to other international countries.
Rumors of the Verizon iPhone being just around the corner have persisted since 2007. If it was going to happen, it would have happened by now. These reports and predictions have been totally wrong for 3 years so I'm not about to start believing them now.
That's complete foolishness.
It WILL happen, just not now like these idiots are saying. It won't happen outside of a standard June launch and I don't think it'll happen until Verizon has an LTE network in place.
I suspect you will start hearing how terrible Verizon's network is.
I do have a 3G iPad and Verizon Droid so I know how bad AT&T data coverage is in my area.....
I'd love to be there when the first few switch to Verizon and then they realize "Hey.....this network is slower....and why can't I talk and surf at the same time?....is my iPhone broken?".
You're assuming everyone uses the iPhone the same way. If 65% of iPhone owners use less than 200 MB of data then that means the majority use their iPhone tooooooo (drum roll please)......make phone calls and have grown tired of failed connections and dropped calls. Those people will switch and barely miss faster speeds and the ability to talk and surf.
Now even ATT is suggesting the contract is coming to an end. Myself, I suspect around June, which was when the iPhone came out.
Rumors of the Verizon iPhone being just around the corner have persisted since 2007. If it was going to happen, it would have happened by now. These reports and predictions have been totally wrong for 3 years so I'm not about to start believing them now.
Yes, but the other rumors had no valid basis as AT&T had a five year contract. That contract was likely modified in Apple's favor the following year when Apple stopped doing iTunes activation that made it easier for people to activate the phone on other networks.
Now even ATT is suggesting the contract is coming to an end. Myself, I suspect around June, which was when the iPhone came out.
The misconception is that the contract started from when ATT started selling the iphone when in reality the contract started when it was signed in 2006, a year before the it was actually available.
... I know Americans love to make their own standard rather than run with the rest of the planet (Pal VS NTSC etc etc) but overall it makes sense for Apple to maintain the GSM standard and expend to T-Mobile in the US and to other international countries.
However, NTSC is about 12 year older than PAL... the "international countries" got color TV much later than the US.
However, NTSC is about 12 year older than PAL... the "international countries" got color TV much later than the US.
NTSC fudged the color to make it work though.. or is that colour?
So bring it on