Monday, April 27, 2009

Apple and Verizon think about iPhone contract

Verizon (VZ)
and Apple (AAPL) discussed the possible development of an iPhone on Verizon, with the goal of introducing it next year, people familiar with the situation say.

It would mark the first time Apple has made a version of the iPhone for CDMA wireless network, which is different from AT & T's GSM technology. Vodafone, co-owner of Verizon Wireless, which already sells iPhone in Europe.

New York based Telecoms entered into "high level" discussions with Apple executive a few months ago when CEO Steve Jobs had been overseeing the daily business, these sources say. They refused to be named because they are not authorized to speak publicly.
Jobs is on medical leave until June, but the conversations are continuing, they say. Apple declined to comment on.

AT & T is the exclusive U.S. distribution rights to the iPhone in 2010, although the specificities are not known. The transaction was proposed in 2006 when the iPhone was still on the drawing board. Many telecom analysts expect AT & T to try to persuade Apple to extend the contract for another year at least.

Should Verizon succeed, it will be a big loss for AT & T, says Roger Entner, head of telecom research for Nielsen. "Breaking the (iPhone) exclusivity with AT & T is a huge thing," he said. "It would send chills in AT & T's stock and senior management."
Power for iPhone was on full display last week when AT & T Wireless reported stellar results. AT & T signed up 1.6 million iPhone customers during the quarter - 40% of them new to AT & T. Revenue from mobile data were up almost 40%. Verizon reports results today.

By linking arms with Verizon, Entner said, Apple would have access to its 80 million customers. While some may already have an iPhone (some people have more than one carrier), most not. Regardless, Entner said, Apple is likely to maintain ties with AT & T. The biggest winners, by far, will be consumers, he said.

"They can choose the network you want to use: AT & T's or Verizon's," he said. "It would ultimately provide consumers with choice and choice is a good thing." Entner says Verizon would fare well in this fight. While AT & T's 3G network is "a little faster," he says, Verizon's network "is generally perceived to be better in terms of reliability."

The biggest loser? "AT & T," Entner says. "It would be a reversal of fortune, because a lot of people who have been disappointed in AT & T's network, but love the iPhone would probably" go to Verizon. Apple will also benefit, he adds, "because it means they want to buy a new iPhone."

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