Verizon iPhone Coming January, 2011? Not So Fast
An Oppenheimer & Company analyst is disputing published reports that Verizon will land the iPhone as early as January 2011. Instead he predicts Verizon won't have a deal in place and start selling the iPhone until the second half of next year.
Oppenheimer analyst Timothy Horan issued a research note this week following a meeting with AT&T CFO Rick Lindner. Coming out of that meeting, he said he concluded that AT&T (NYSE: T) will likely hold on to its position as the exclusive U.S. carrier for the Apple (NASDAQ: AAPL) iPhone until at least the second half of 2011.
"The company gave some solid reasons as to why the iPhone will not affect its financial results all that much, but also why VZ is unlikely to get it until [the 2011 second half] or later," he wrote. Those are mostly technical issues that can take time to fix.
Verizon Wireless, a subsidiary of Verizon Communications (NYSE: VZ), is a company in transition. It's shifting from its 3G CDMA network to 4G LTE and plans to begin selling 4G phones starting next year. Will Apple be one of them? It's hard to say because the LTE technology is still not mature, Horan notes. AT&T is also moving to the LTE technology but won't roll that out until 2012.
"AT&T made a bunch of good technical points on why Apple may have to wait until LTE technology matures from an OS and technology perspective. In addition, the device will probably be larger (given the three different technologies that it would need to support and a larger battery), which will not make Apple happy," he wrote.
An LTE phone would have to support LTE, 3G and 2G all in one device, which could mean multiple radio chips. "Apple greatly cares about the iPhone quality and form factor and it is difficult to see how this could be made workable for an LTE/EVDO/CDMA phone in the next year," he wrote.
At the same time, a CDMA phone probably would not be as streamlined as AT&T's iPhone 4 or able to offer as many features as AT&T's GSM network.
Defecting from AT&T?
The assumption has been that when a Verizon iPhone hits, there will be a mass exodus from AT&T due to the many complaints about the company's network. Neither AT&T nor Horan believes that. For starters, AT&T recently hiked its early termination fees (ETF) for smartphones from $175, descending for each month closer to the end of the contract, to $325. Second, existing AT&T iPhones won't work on Verizon's network.
Between the ETF and $199-$299 price tag for a new iPhone, a customer could spend $400-$500 just to change carriers, an unappealing proposition. If they are on a friends and family plan, that would mean losing the plan unless everyone jumps at once, which is also unlikely. Linder told Horan that 70 percent of the iPhone customers on AT&T's network are on family plans.
And AT&T's promised network upgrades should mean improved reception, a major complaint that is behind the desire for a Verizon iPhone. A better AT&T network might placate potential defectors.
Horan believes Verizon will largely sell the iPhone to its existing customer base, something borne out by a recent ChangeWave survey that found half of all Verizon Wireless customers surveyed would be very likely to upgrade to an iPhone. He believes Verizon could sell 10 million iPhones in the first 12 to 18 months of availability on the Verizon network.