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A lot has changed in the wireless landscape in the last two years for the iPhone and and the iPad. In the United States, AT&T lost its exclusive on the iPhone, and Verizon and Sprint joined in on the fun. But each carrier has had their own set of problems accommodating the devices and huge amounts of data demand from iPhone and iPad users.
Despite the phenomenal device growth on all the US carriers combined, It hasn't been as smooth a ride as everyone has wanted. Apple is an extremely customer service oriented company and having to leave the network support to the carriers is probably not something the company will ever admit to be happy about.
In order for Apple to not have to deal with carrier mishegas in the US anymore, it probably makes sense for it to become a carrier itself. Obviously, there would be significant regulatory issues that the company would have to overcome, but it wouldn’t be impossible for Apple to do.
In terms of actual infrastructure costs of what would be needed to build a 4G network, the company would be looking at anywhere between 5 and 10 billion dollars to pull it off, depending on whether or not they needed to build new towers, could piggyback their transceivers on existing ones, what backhaul services they would need to buy, network operations centers needed, et cetera.
Of course, Apple could just go and buy a carrier that already does business in the US. The logical choice would be Sprint/Nextel (S), which is currently capitalized at approximately $6.4B and already has a significant customer base.
The other carriers are way too big for the company to swallow. The next smallest would be T-Mobile USA, which is actually a subsidiary of Deutsche Telekom AG (DTEGY.PK) a German-owned company.
Apple could certainly offer to take the US subsidiary off the company’s hands, and it may still even be attractive for Deutsche Telekom to dump the asset, as it tried and failed to do in its aborted $39B acquisition with AT&T, but given how painful it is to buy a telecom company of any substantial size without going through a huge regulatory approval ordeal, it’s unlikely Apple could complete the transaction, even though it could easily finance it all by itself.
But you never know.
FaceBook. Uhhhhh, yeah. FaceBook.
As much as it drives me crazy, FaceBook is the hottest company right now next to Apple itself. And with over 800 million users sharing data and communicating, it makes it among the most desirable, if not the most desirable audience for Apple to integrate its products with.
This has become something of a hassle of late, as in 2010 Apple tried to launch its own pseudo-social network with iTunes version 10 in the form of Ping, which was supposed to have FaceBook connectivity at launch date but issues with last-minute negotiations apparently caused Apple to have to pull that feature from the software.
Apple also tried to get Facebook integrated into the last iOS 5 release that debuted with the iPhone 4S, but the companies failed to friend each other. As it happened, Apple chose to go with Twitter instead. There is some evidence to support that that iOS 5.1 will have Facebook integration, but we can only wait and see.
The problem of course is that FaceBook isn’t (yet) a publically-traded company and its market valuation depending on who you talk to is estimated between $50B and $100B.
That’s a huge chunk of change for Apple to blow even with its massive war chest for what is essentially a freakin’ web site, so the chances of the Fruit Loop and company completely sucking up Zuck and Friends is pretty close to nil.
For Apple to have a private controlling share it would probably have to cough up anywhere between 10 and 20 billion dollars in order to have a 20 to 30 percent stake in the company. Whether that would be actually enough for Zuckerberg and friends to seal the deal is unknown.
If the companies couldn’t come to some sort of agreement, Apple could certainly go head to head with FaceBook, by hiring away its top talent, and built an Apple Social Network, which I’m tentatively calling “iFriends”.
Also Read: FaceBook for Grownups — Can Apple, Microsoft or Google Build One? (May 2010)
I actually proposed this earlier in a piece I wrote about the maturity and questionable ethics of FaceBook and its founders, because I believe Apple does indeed have the skills and talent to produce a high quality and secure, family-friendly Social Network. But iFriends would have to be something of a Manhattan Project for the company, and it would likely eat up at least a billion dollars in development and infrastructure, if not more.
If not FaceBook, perhaps Apple should consider going the professional network route, and throw some cash at LinkedIn, which in 2008 was valued at about $1B. Apple could probably snatch up the whole thing for around twice that today, if not significantly less. And unlike a fresh Social Network that Apple would have to build from scratch, it already comes with a strong user base.
That might actually allow the company to make some serious inroads with the enterprise and business crowd, which may still have reasons to be tied to their uncool BlackBerries and may see a business networking advantage integrated into their smartphones and tablets as a reason to switch to Apple’s platform.
And then of course, there's Twitter, which like LinkedIn is still a private company that Apple could make a huge land grab on.
For the entire mobile and consumer device industry, an Apple purchase of ARM Holdings (ARMH) would be an absolute nightmare. For Apple, it would allow them to have exclusive rights to the company’s technology roadmap and control the licensing of a key embedded systems technology that sits at the core of many consumer electronics products.
Once the licensee terms ran out, Apple could easily terminate the architectual licenses of companies it views as its competitive enemies, and then the major mobile players like Google, Microsoft, Samsung, HTC, LG, RIM, Texas Instruments, Freescale, Marvell, nVidia, Qualcomm and dozens of others would be out in the cold if Tim Cook decided he wanted any of them to go away.
And we all know that his predecessor, Steve Jobs, made no bones about wanting to "Go Thermonuclear" on anyone who made Android handsets and tablets.
This is all assuming, of course, if any of these players didn’t have perpetual license agreements in play, in which case Apple would be obligated to permit those players to continue to manufacture ARM-based chips, depending on the IP of which chip architectures they had access to.
Still, the architectural platform which powers the core of just about every smartphone device and SOHO routers and numerous other consumer electronics products would be under Apple’s total control.
This could cause any number of players using the ARM platform to go scrambling for alternative embedded technologies, such as low-power x86, MIPS, or even the PowerPC architecture which powers the Sony Playstation, the XBOX 360 and the Nintendo Wii.
Of course, with any large purchase of this type — and the British company is capitalized at about $12.54B at the moment and would likely sell for no less than 15 to 20 billion dollars — it would be subject to serious government scrutiny in the US, the EU and Asia and Apple would very likely find itself hard pressed to “go medieval” on ARM licensees like a flock of Angry Birds.
But it could definitely make life difficult for Apple's competitors if the sale went through.