Verizon's iPhone: Here comes the fallout

Verizon's iPhone: Here comes the fallout

Summary: Verizon Wireless will finally get Apple's iPhone on Tuesday and the network and sales machine appears to be ready to roll, but the launch is only the beginning. The fallout will take quarters to play out for the likes of Motorola Mobility, AT&T and others.

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Verizon Wireless will finally get Apple's iPhone on Tuesday and the network and sales machine appears to be ready to roll.

But Tuesday is only the beginning. While the iPhone is an obvious boon for Apple and Verizon Wireless there are other ripple effects to consider. Here's a look at the moving parts that have everyone talking.

Apple: The company just doubled its distribution for the iPhone and the prospects are rosy in terms of units. Piper Jaffray Gene Munster is assuming that AT&T will have flat iPhone units in 2011 at about 15 million. Verizon is expected to sell 15 million in 2011, according to Munster. The iPhone landing at Verizon will add $5.9 billion and earnings of $1.27 a share to Munster's current estimate. These estimates are a moving target depending on whether the iPhone hits Verizon stores in February or March.

AT&T: The sky won't fall for AT&T. However, AT&T will become less dependent on iPhone sales. That's not a surprise since AT&T is ramping Android handsets. Analysts are generally expecting limited cannibalization for AT&T. I'm in the camp that agrees with that theory. Many folks are already locked into AT&T. Piper Jaffray analyst Christopher Larsen wrote:

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.

However, AT&T will face a lot of questions about its network. Verizon Wireless is already boasting about an unlimited data plan. Hudson Square Research analyst Todd Rethemeier disagreed and downgraded AT&T. He said:

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.

Motorola Mobility: No company has been more tethered to the success of Verizon's Droid franchise in the last year. Motorola's wireless division would be on the scrap heap if it weren't for Android and Verizon Wireless. The company is now hitching its wagon to 4G and LTE. If the iPhone isn't LTE, Motorola Mobility may be just fine. In any case, Motorola Mobility did a nice job of diversifying with AT&T.

Verizon Wireless: Verizon is a clear winner here, but may not get the windfall you'd think. The company was already holding its own with Android devices. Verizon doesn't need the iPhone as much as it did two years ago. Nevertheless, Verizon is likely to gain market share with the iPhone. One huge wild-card is the network. Verizon is thumping its chest that its network can handle the iPhone. If Verizon's network stumbles AT&T's network reputation could actually improve. Related: Verizon iPhone: How important is 4G LTE capability?

T-Mobile and Sprint: If Verizon gets its own exclusive deal with the iPhone, the two other major wireless carriers would be locked out of the iPhone/iOS market. That would be a big problem for both carriers. In fact, Sprint and T-Mobile could ponder a merger if they started to lose share. A merger between Sprint and T-Mobile would be a network nightmare though because incompatibilities abound.

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

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104 comments
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  • RE: Verizon's iPhone: Here comes the fallout

    It'll be interesting to see what a VZW iPhone does to VZW Android sales. I'm one of those who think that this is an overdue move... at any rate this will be interesting to watch - I'll get the popcorn.
    athynz
    • RE: Verizon's iPhone: Here comes the fallout

      @athynz VZ is making itself attractive to mobile designers. In long term, manufacturers will release more CDMA handsets verse GSM in the United States.
      VZ went off the radar when at&t and T-Mobile introduced the GSM network. With the bad rap they?ve received on network quality, most consumers tend to think CDMA is better. VZ iPhone will be a boost for VZ in so many ways.
      ShallRemainNameless
      • RE: Verizon's iPhone: Here comes the fallout

        @ShallRemainNameless

        @ShallRemainNameless
        Your claim, 'in the long term, mfgr's will release more CDMA handsets than GSM' makes no sense.

        I think you'd better do some reading on LTE, seeing as the two biggest players are moving to LTE, which is based on GSM.
        draymis
      • EEEEEHHHHHH! Nope, Correct Answer is C) None of the above

        Nope, neither GSM nor CDMA. Consumers know that LTE is coming and will sit on the sidelines until it comes out. 3G is only for when you need the internet in the worst way.
        gallee
      • GOOONNNGGG!!!

        @gallee

        NOPE again! Ha! This is so funny. You know who knows LTE is coming out? Well, here it comes and be real ready to be shocked...appearantly; NOBODY but geeks. Joe Average, on the average doesn't know the difference from CDMA, GSM or LTE. Ha! Doesn't know the difference, I should say doesn't even know they exist never mind what those acronyms mean.

        This has been and continues to be one of the largest problems from many of the posters who do post here about predictions of whats going to happen, usually pertaining to sales of a specific product; they know the tech, they know the issues and they have very little in touch with the Joe Averages, the multi multi millions of Joe Averages who not only don't know any of the tech, they don't even know anyone who knows about the tech, at least not much. Its like going and asking engine designers what engine is going to sell best, and they start telling you nobody is going to want the engine with type X valve porting or or with type Z cross whatever fuel injecting. Unless someone specifically sits Joe Average down and explains in some kind of detail (and thats detail not so boring he could care less)the whys and whats of what each kind of tech brings with it and what that means for Joe Average, Joe Average is going to purchase,most often, the product which looks the coolest/has best word of mouth rep/lowest price product. In some combination of that.

        I cant believe that so many around here either never get too far away from the circle they travel in that knows tech, or that they just never listen to the dumb ass sitting next to them on the subway telling his buddy that he just got the coolest phone for no other reason then the way it looks and how cheap it is.

        I seen one kid showing another the other day the cool app he got that lets him swing his iPhone in a fist and it list's off a "punch" sound effect. Kid #2 says I'm getting one of those for sure. I'm sorry, but thats what the majority of sales are all about. Quite frankly, when I listen to half of what Joe Average public says about new tech products I become more and more convinced that the only real reason for any tech company to keep upgrading their product is because if they produce complete outdated crap, someone on the news "tech segment" is going to say something and then everyone will know and that will hurt sales. Before a product comes out its like only the smallest portion of the population even knew it was in the works.

        I cant begin to tell you how many times I have someone ask me, "did you here product X is coming out today and its supposed to be so cool" and I have to say, "ya, read about its upcoming release on ZDNet like 4 months ago".

        And believe me, quite often they have no real clue or valid explanation why the product is so "cool", or even if thats true. Believe me, far too many people purchase a product for no other reason then it looks cool or they have heard a story (without understanding any real tech issues) that it is cool. I'm afraid thats what drives a huge portion of all high tech sales. Too many burger flippers and fashion store clerks know or could care less about GSM, CDMA,LTE or anything like that that makes their brain hurt. Just tell them the price and if it looks cool and they have heard its cool and they can afford it, they will buy it, don't waste their time and your breath trying to explain why they should or shouldn't purchase.
        Cayble
      • CDMA is going away.

        @ShallRemainNameless
        CDMA is going away, along all forms of TDMA, those being D-AMPS (which many people and companies called TDMA), GSM and iDEN. Verizon Wireless, AT&T Mobility and MetroPCS have all announced they are moving to LTE.

        Sprint has not announced moving from CDMA and their "4G" is actually WiMAX, which is essentially a modification of WiFi. WiMAX solves the hidden transmitter problem of WiFi, whihc is why a single WiFi hotspot cannot cover a huge area with a lot of users.

        Clearwire is a WiMAX provider, and I believe they are being used by Sprint for their "4G" network.

        As an aside, without LTE on the Verizon iPhone, I don't see the point. Why should I give up the ability to talk and surf the Internet at the same time by going to Verizon?

        I'm going to wait for the iPhone 5, and keep using my iPhone 3 on AT&T Mobility.
        Fetrow
  • RE: Verizon's iPhone: Here comes the fallout

    I'm curious to see if us current Verizon customers locked into a contract will see any sort of "early upgrade" deal so that we can get our hands on the iPhone without paying 600 dollars.
    shnhwk
    • RE: Verizon's iPhone: Here comes the fallout

      @shnhwk
      ha this is verizon, of course we won't
      KBot
    • Early Upgrade From Verizon

      @shnhwk I have already been offerd an uograde with 11 months left on my two year contract. I'm sure Verizonwill offer early updates, but will the apple selllike other Verizon phones? will the Iphone sell at the normal discount Verizon offers like $124.99 with a 2 year contract or will we have to buy an IPhone at retail
      alfitz@...
    • RE: Verizon's iPhone: Here comes the fallout

      @shnhwk haha! in your dreams ...
      ShallRemainNameless
    • RE: Verizon's iPhone: Here comes the fallout

      @shnhwk It's likely - One thing I do like about VZW is the early upgrade offers... I replaced my old BB Curve 9 months into the contract with a new BB Curve 2 (8530) for about 40 bucks after rebate. I would not expect that kind of deal with the iPhone - more than likely it'll be subsidized around the same price as AT&T versions... but I could be wrong.
      athynz
    • RE: Verizon's iPhone: Here comes the fallout

      @shnhwk
      Prob not but what I'm curious to see, is how badly will the iphone cripple Verizon's network like it did to AT&T.
      Free Webapps
  • Bout time

    Seeing how WP7 and Android have been ripping into potential customers for some time now...
    The one and only, Cylon Centurion
  • RE: Verizon's iPhone: Here comes the fallout

    I will be waiting with bated breath to see how the Verizon network performs with a couple million iPhones added to the bandwidth usage.

    What I am getting at is... Finding out if Verizon has a few problems with supporting that much data... possibly showing that AT&T isn't as bad as many have viewed it to be.
    Geuseppi
    • Me too

      @Geuseppi
      And I wonder if the predicted "exodus of iPhone users" will lighten the load on ATT. My contract runs through July. I would only pay the ETF to switch early if there are sustained reports of better service.
      use_what_works_4_U
  • RE: Verizon's iPhone: Here comes the fallout

    I'm a verizon customer and I am fairly confident that when the iphone comes to Verizon, unless they made contingency plans before hand as a result of the AT&T issue, the dropped calls and overworked network problems of AT&T are going to be on Verizon as well.
    KBot
    • RE: Verizon's iPhone: Here comes the fallout

      @KBot Doubtful, AT&T sucked before the iPhone came out...
      snoop0x7b
      • RE: Verizon's iPhone: Here comes the fallout

        @snoop0x7b
        How funny! Ive been with ATT since the PrimeCo buyout and currently use a legacy sim (AT&T Wireless all blue sim) and I didn't start having issues on my WM6 devices until the iPhone hit at&t's network.
        Free Webapps
    • RE: Verizon's iPhone: Here comes the fallout

      @KBot AT&T's network issues were not due to iPhone usage, they were infrasructure issues. Verizon has already proved that they don't have the same issues on their network.
      guardianmega
      • I hope you're right but ...

        @guardianmega
        I have had the same service through several provider buy-outs and network rebuilds since the late 90s. First it was CellularOne, then Cingular, then AT&T, all on the same network. I never had any service issues in my area until the iPhone. In fact, it wasn't until the iPhone4 came out that the service issues I did have became bad enough to make me want to switch. No, for those of you wondering, it's not the iPhone4's antenna causing my issue. My handset is still an iPhone 3G.
        use_what_works_4_U