Apple using iPhone to play AT&T against Verizon?

 

It makes sense for Verizon to have iPhone and it makes sense for AT&T to make sure that doesn't happen, says the head of telecom research at Nielsen

NEW YORK:Apple Inc appears to be playing the top two US mobile operators AT&T Inc and Verizon Wireless against each other as it shops for the next distributor for its popular iPhone.

Whether one or both operators sign a deal, analysts are in no doubt that Apple wins in the end.

Apple has an exclusive and very lucrative deal with AT&T - believed to run into 2010 - to carry the iPhone on its Global Service Mobile (GSM) network. Research firm iSuppli estimates that Apple earns a profit margin of more than 50 per cent for iPhone.

But Lowell McAdam, the head of Verizon Wireless, recently spoke with Apple chief executive Steve Jobs and senior Apple executives about wireless devices, said a Verizon Wireless spokesman.

"It makes sense for Apple to spread the love to Verizon and it makes sense for Verizon to have iPhone and it makes sense for AT&T to make sure that doesn't happen," said Roger Entner, the head of telecom research at Nielsen.

"The winner is Apple either way," he said.

Adding Verizon as a carrier could more than double Apple's current addressable market; AT&T has about 78.2 million wireless customers, while Verizon has 86.6 million, according to their most recent quarterly reports.

But AT&T, which had 1.6 million new iPhone activations in the first quarter this year, is expected to fight tooth and nail to keep its iPhone exclusivity.

Analysts say Apple is talking to both AT&T and Verizon in an effort to strike the best deal it can once the AT&T agreement expires. "My 2 cents is that it's a negotiating tactic," said Collins Stewart analyst Ashok Kumar.

Broadpoint AmTech analyst Brian Marshall said Verizon subscribers represent a "huge untapped market" of subscribers that Apple may covet, but he also noted that Apple is famous for driving a hard bargain.

"Apple is one of the best negotiators out there, and at the end of the day they have the most compelling product so they're in a very strong bargaining position," he said.

One big question is whether Verizon Wireless would be willing to give the same level of control to a phone maker that AT&T has ceded to Apple. For example, software applications for the iPhone must be sold through Apple's App Store.

Verizon Wireless already has a mobile search agreement with Apple's arch-rival Microsoft Corp and the two are also collaborating on a touch-screen cellphone to rival iPhone, according to a report in the Wall Street Journal on Tuesday. - Reuters