AT&T: Five reasons the sky won't fall when iPhone goes to Verizon

AT&T: Five reasons the sky won't fall when iPhone goes to Verizon

Summary: With the launch of Apple's iPhone at Verizon Wireless Tuesday the histrionics over AT&T are about to commence. Here's the story line: AT&T will lose customers, momentum and will be lost without the iPhone. The reality is far more nuanced than that.

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With the launch of Apple's iPhone at Verizon Wireless Tuesday the histrionics over AT&T are about to commence. Here's the story line: AT&T will lose customers, momentum and will be lost without the iPhone. The reality is far more nuanced than that.

To see this duel over AT&T here's a look at two excerpts from Wall Street analysts pondering the launch of the Verizon iPhone.

First up, Piper Jaffray analyst Christopher Larsen:

While AT&T’s iPhone exclusivity has brought in many new customers from other carriers, this trend has waned in recent months; most iPhones sold today are upgrades for current AT&T customers. (However, the recent lower price points at $99 and $49 for refurb and 3GS appear to have driven some measurable traffic post-Christmas.) The real question is will AT&T customers defect for the Verizon iPhone? We don’t think so. Nearly 80% of iPhone users are on a family plan or corporate plan and approximately 75% still have at least a year left on their contracts, by our estimates.

And then there's Hudson Square Research analyst Todd Rethemeier:

Over the next few days, we suspect that investors will read many comments about how this won’t be THAT bad for AT&T. We would urge investors to consider the following math (all are estimates, since the company hasn’t reported 4Q results yet). In 2010, AT&T had 11.1 million postpaid gross adds, with 8.6 million disconnects, resulting in 2.5 million net adds. About 37% of those gross adds, or 4.1 million, were on the iPhone. Now, if we assume that AT&T loses 50% of the iPhone gross adds (i.e. AT&T and Verizon split the new iPhone sales evenly), this means that AT&T’s gross adds will drop by about 2.05 million (50% of the 4.1 million). So, AT&T’s overall postpaid gross adds are now 9.0 million (11.1 million less the 2.05 million). The disconnects of 8.6 million don’t change, and AT&T’s postpaid net adds are now 400k for the full year. And, this is only assuming that Verizon takes 50% share of the new iPhone sales – it doesn’t assume that any of AT&T’s existing customers cancel their contracts and switch to Verizon.

The truth is likely to be in the middle. Here's the most likely scenario. When the Verizon iPhone launches there will be a few vocal---most likely tech bloggers---that will break AT&T contracts and go with Verizon. If Verizon's network doesn't stumble out of the gate it'll be a bash AT&T festival.

Once that smoke clears, it'll be business as usual. Simply put, inertia and two-year contracts take over. Here are five reasons why the sky won't fall on AT&T.

  1. You're locked in already. How about that $49.99 iPhone 3Gs? What about all those sweet iPhone 4 upgrades a year ago? Add it up and the majority of AT&T customers are already locked in for at least 18 months or so. You can bolt for Verizon, but it's going to cost you. Most people---outside of San Francisco and New York City---aren't going to break contracts.
  2. AT&T still has the iPhone. Remember, AT&T isn't losing the iPhone. The wireless carrier is just losing exclusivity. A few AT&T customers will be poached by Verizon, but the exact amount is unknown. It's quite possible that Verizon Wireless just adds to iPhone demand. There's a lot of pent-up demand for the iPhone at Verizon, which can go for two years just selling upgrades to its existing customers.
  3. AT&T is already diversifying. If you paid any attention to AT&T at the Consumer Electronics Show you'd find a carrier that has fallen in love with Android. Why not? Motorola is also looking to diversify. AT&T has grabbed an impressive lineup of Android devices from Samsung, Motorola and HTC. Some of those Android devices will help offset any losses to Verizon over the Android.
  4. Inertia rules. Consumers can gripe about their carriers constantly, but few of them actually jump ship. Inertia dominates. Families with group plans, enterprises and consumers that have good coverage from AT&T will stay put.
  5. AT&T's reputation may improve. The situation today looks like this: AT&T's network can't handle the iPhone in a few locations and the company gets crushed in the perception game. Losing exclusivity on the iPhone could actually help AT&T's network. If iPhone fans head to Verizon, AT&T will have a chance to catch up to bandwidth demand. The other wild-card: Verizon has been downright cocky about its ability to handle the iPhone's data demand. If Verizon stumbles, AT&T will look much better.

Related:

Topics: AT&T, Hardware, iPhone, Mobility, Smartphones, Verizon

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30 comments
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  • RE: AT&T: Five reasons the sky won't fall when iPhone goes to Verizon

    AT&T losing the iPhone will help AT&T? What have you been smoking? Everyone I know who has an iPhone is waiting to dump their crappy AT&T service. This article comes across like you're an AT&T shill.
    lars448
    • RE: AT&T: Five reasons the sky won't fall when iPhone goes to Verizon

      @lars448 Everyone you know? Amazing. Nobody I know has such a plan! I can only assume you're in NYC where AT&T service is reportedly abysmal. Look, I don't have anything Apple, so I'm no fanboi, but I think the truth lies in the middle.
      bmgoodman
    • He did say...

      @lars448 <br>...AT&T isn't losing the iPhone, only exclusivity. If AT&T needs exclusive deals to avoid collapse, it deserves to collapse, but I don't think it needs the exclusive deal... the lack of one might even prompt AT&T to pay more attention to customer service.
      John L. Ries
    • Guess again, dipstick.

      @lars448

      I've been an AT&T customer (and it's predecessors) since '96, and have no plans to move anytime soon. My daughter is getting an iPHone later this month, and it's only going to add about $15 month to my family plan. Neither my wife or I WANT a smart phone of any kind (How I wish I could get a phone that just makes calls - no camera, no nothing but the phone), and we don't use or have internet on our phones.

      We plan to stay with AT&T for a while longer.
      JLHenry
    • RE: AT&amp;T: Five reasons the sky won't fall when iPhone goes to Verizon

      @lars448

      How easily people forget that AT&T became the #1 carrier in third quarter 2003...i.e. nearly 4 years BEFORE the iPhone...so the idea that AT&T's success is all due to the iPhone is complete nonsense.

      I was a customer back then and there is no doubt that the quality of the network has declined since the iPhone was introduced, no doubt at least in part due to the overload caused by the iPhone data hogs.

      And if Verizon is going to advertise 'unlimited data' with the iPhone, this is going to come back to haunt them. Encouraging all the data hogs to come to Verizon and choke their network with massive usage is not a smart strategy.
      Doctor Demento
    • RE: AT&amp;T: Five reasons the sky won't fall when iPhone goes to Verizon

      @lars448 I have AT&T, my husband has Verizon, based on his troubled service, I would not even consider jumping ship for Verizon even for a moment!
      PamieK
    • RE: AT&amp;T: Five reasons the sky won't fall when iPhone goes to Verizon

      @lars448 Are you brain damaged or is it that you cannot read. AT&T is NOT losing the iPhone. They are losing the exclusivity of being the only US iPhone carrier. So yes VZW will sell an iPhone. AT&T will continue to sell the iPhone. I hope this clears things up.
      athynz
  • RE: AT&amp;T: Five reasons the sky won't fall when iPhone goes to Verizon

    People need to realize just exactly what legacy hardware each network comes with. Verizon bought up the little Bells up near NYC and San Francisco, and AT&T bought them elsewhere (like SBC, etc in Texas). My AT&T coverage is great here in Texas, but sucks in NYC. These are not hard realizations to come to, and I'm one of the ones that won't switch because Verizon sucks where I am.
    007hornet
    • RE: AT&amp;T: Five reasons the sky won't fall when iPhone goes to Verizon

      @007hornet

      Not that it matters but actually SBC bought AT&T and then changed their own name to AT&T to capitalize on the name recognition.
      kb5ynf
  • Are you sure that there will be a Verizon iPhone?

    Or is this just hype based on rumors?
    WOuldn?t everyone feel foolish, if there is no such announcement (Unless that announcement has already been made)
    Rick_K
  • The Sky Won't Fall

    But Windows Phone 7 will.
    cyberslammer2
    • Another important Win Phone 7 message brought to you by...

      @cyberslammer2

      the Champion Village Idiot.
      SonofaSailor
      • Did you notice his avatar?

        @SonofaSailor

        He's apparently advertising . . . ;)
        JLHenry
  • RE: AT&amp;T: Five reasons the sky won't fall when iPhone goes to Verizon

    I agree with some of the points you made, Larry. I live in a major metropolitan area, and for many of my friends with smartphones (BB, Nokia, etc.) using ATT here, there are no issues with their phones. Only my friends with various iterations of the iphone complain about ATT service (not all of them with iphones, but most of them) which leads me to believe that it is actually their iphone device, not the ATT service. However, the ones having issues haven't talked about jumping ship over to Verizon just yet. Anyway, it's good that ATT will still be able to offer the iphone as not everyone has good Verizon service everywhere.
    1019902735
    • Yip,

      @1019902735 I do believe, from having had numerous giggles at the expense of iPhone owners (some being relatives), that tracfone have nothing to fear from iPhones being on the CDMA network. In the past, tracfone have backed Apple up with cheap handsets, there to insure you can still have a phone conversation, without paying much more, and thereby still justify having an iPhone.
      With the new CDMA version of the iPhone, tracfone will probably sell more GSM phones.
      Frangipann
  • RE: AT&amp;T: Five reasons the sky won't fall when iPhone goes to Verizon

    Whats this? yet another article about the iphone on ZDNet? Whaaaaaa?
    Loverock Davidson
  • Biz as usual...only time &amp; marketing effort will tell

    100% speculation so far. There's no way to be sure how VzW iPhone sales will do --- even w/o network gripes. AT&T still sells the iPhone and apparently everything else that is Android. Analyst should be thinking about how Verizon will continue to offer updated Android, RIM products while "getting cozy" with the iPhone. AND analysts should be vetting how Verzion will show its strength with the iPhone while not looking like that's all they sell.
    jlt0x
  • RE: AT&amp;T: Five reasons the sky won't fall when iPhone goes to Verizon

    Two people at my work just threw out their iPhone 4's to get Android phones on Verizon... because they don't drop calls.

    I'm betting the drop call issue won't go away with Verizon, I always figured it was a handset problem.
    Droid101
    • RE: AT&amp;T: Five reasons the sky won't fall when iPhone goes to Verizon

      @Droid101 They literally threw out their iPhone 4s? Really?
      athynz
    • RE: AT&amp;T: Five reasons the sky won't fall when iPhone goes to Verizon

      @Droid101 Based on the number of times we have seen you post something very similar about this many people I work with just switch from iPhones to Android phones you must work with most of the people that have bought iPhones <img border="0" src="http://www.cnet.com/i/mb/emoticons/wink.gif" alt="wink"><br><br>Now of course when it comes to the iPhone it's not like we can really believe anything you say anyway.
      non-biased