Apple Could Double iPhone Sales With Verizon Wireless, But There’s Downsides Too
Here’s the deal: Apple (NSDQ: AAPL) could likely double sales of the iPhone by ending its exclusive arrangement with AT&T (NYSE: T) and adding Verizon Wireless (NYSE: VZ) as its next distribution partner. However, a deal of that kind could cost Apple dearly — up to $200 a phone.
Bernstein Research analysts Craig Moffett and Toni Sacconaghi wrote in a research note this morning that by adding Verizon, Apple could boost iPhone sales by at least 100 percent, but AT&T would likely reduce its subsidy per phone from an estimated $450 to around $250 to $350, Barron’s reports. In that scenario, Apple would have to charge customers more for the phone, or it would have to eat that cost, and lower margins on each device sold.
Adding Verizon, could be worth it. Verizon is the largest U.S. carrier, and while more than 10 percent of AT&T’s subscribers are iPhone users already, all of Verizon
Besides lowering the price for AT&T, Apple would have a low margin with Verizon on a CDMA iPhone. An iPhone user starting today will not last two years. The traditional net present value model used by operators on a two-year cash flow falls apart. That's also why AT&T needs a lower price. Verizon would not get a payback on a high subsidy to customers. Verizon will have to upgrade the customer to LTE before two years runs out. Apple's goal has to be first-look LTE devices with Verizon. Partnering to test the market for mobile tablets has more potential for both Verizon and Apple.
The mobile tablet idea sounds stupid. Verizon should get a non-lite iphone (if anything, it should be a souped up, higher-profile version of the current iphone). They will retain more current customers and gain back customers they lost for not carrying the iphone. People will migrate back in droves because of Verizon's superior network and dropped call percentages.
The tablet is soooo the way wrong idea to go. Verizon will be missing the boat again completely, and this time it won't just cost them money they could've made… it'll be costing them the money they'll be spending on R&D on a tablet. people need phones. Not largeer tablets that have no phone capability.