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Apple, Verizon In iPhone Talks

Posted on: Monday, 27 April 2009, 10:25 CDT

Verizon and Apple are in talks about the possibility of releasing an iPhone for the cell phone carrier next year, according to people familiar with the situation.

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

A few months ago, the New York-based telecom entered into "high-level" discussions with Apple management, when CEO Steve Jobs was overseeing day-to-day business, according to the sources.  The sources declined to be named because they are not authorized to speak publicly.

Jobs is taking a medical leave until June, but the conversations are said to still be continuing, although Apple has declined to comment.

Though specifics are not known, AT&T has exclusive U.S. distribution rights to the iPhone into 2010.  The deal was struck in 2006 while the iPhone was still on the drawing board.  Many telecom analyst expect AT&T to persuade Apple to extend the contract for at least another year.

If Verizon succeeds in offering the iPhone, then it would be a huge loss for AT&T, according to head of telecom research for Nielsen, Roger Entner.

"Breaking the (iPhone) exclusivity with AT&T is a huge thing," he says. "That would send shivers into AT&T's stock and senior leadership."

The effect of having the iPhone exclusively linked to AT&T's network proved powerful when AT&T reported stellar wireless results last year.  There was 1.6 million iPhone customers during the quarter, and 40% of them new to AT&T.  The mobile data revenue was up almost 40%.  Verizon's results for last quarter are due to come out today.

Entner says that by linking arms with Verizon, Apple would gain access to its 80 million customers.  Even though a few might already have iPhones, due to some people having more than one carrier, the bulk do not.

However, Entner says that Apple would likely maintain ties with AT&T.  The biggest winners by far would be the consumers, he says.

"They could pick the network they wanted to use: AT&T's or Verizon's," he says. "It would finally give consumers choice, and choice is a good thing."

Entner says that while AT&T's 3G network seems to be faster, Verizon's network is generally perceived to be more reliable.

Entner says. "AT&T would be in a reversal of fortune, because a lot of people who have been disappointed in its network, but love the iPhone, would probably jump to Verizon."

He added that Apple would also benefit, "because that means they'd have to buy a new iPhone."

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On the Net:

• Apple
• Verizon

Source: redOrbit Staff & Wire Reports

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