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Multiple US iPhone carriers inevitable, says Citi

updated 05:35 pm EDT, Wed May 6, 2009

Citigroup on iPhone telcos

Apple is virtually guaranteed to open up the iPhone to more US carriers within the next two years, say analysts with Citigroup. Richard Gardner and other members of Citi's research firm note that while the exclusive arrangement with AT&T has been beneficial for Apple, there are a number of reasons to believe the company will move to support other carriers, namely Verizon. Apple is in a position to force telcos to bend to demands, for instance, including generous data plans, a lack of co-branding and an absence of revenue sharing at the App Store.

There is also a diminishing number of potential iPhone customers at AT&T, as some 12 percent of post-paid subscribers already own the device. The maximum is predicted to be 25 percent, which may require marketing to people unwilling to switch from other carriers. Sprint, Verizon and T-Mobile combined should in fact offer a target market as big as 150 million by 2010, although just 30 million of those are likely to be interested.

A move to 4G technology -- LTE -- is also judged to be unnecessary, since creating a CDMA iPhone would simplify sales in India and China, and potentially offer a defense against Palm and RIM, some of Apple's greatest competition in the smartphone realm. The two companies have long designed both GSM and CDMA devices.

AT&T is thought to be interested in paying to extend exclusivity, but Gardner notes that the opportunity offered by multiple carriers may lead Apple to make exclusivity too expensive. Verizon by itself could theoretically add 10 to 20 million more iPhone subscribers over the course of five years, says Gardner.




by MacNN Staff

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Comments

  1. dagamer34

    Joined: Dec 1969

    +4

    Simplicity

    To be honest though, CDMA is on it's way out. While Apple could in theory get more growth now, some things are best done over time. In addition, it means maintaining support for different hardware in the same country, and that has logistical implications.

    It's easier to ship one model to China and another to the US (for both Verizon and AT&T), than it is to ship multiple models to the US.

  1. Arty50

    Joined: Dec 1969

    +4

    This is just stupid

    "A move to 4G technology -- LTE -- is also judged to be unnecessary"

    It's amazing what comes out of some analysts minds. Verizon's implementing LTE next year, and AT&T and T-Mobile will be following suit in 2011. By producing an LTE iPhone Apple can make a big splash in the Verizon marketplace next year, sell a ton of new iPhones to existing AT&T customers (both new iPhone customers and upgraders) the following year, and capture some sales from T-Mobile. It's a no brainer really.

  1. testudo

    Joined: Dec 1969

    -4

    Re: Simplicity

    I'm sorry, but last I checked Apple had over 20 billion dollars in cash and was raking in record profits. One would think it would not be logistically so difficult to ship two different phones in the US. h***, it sure seems like RIM, Motorola, Samsung, etc, all are capable of doing it.

    But all this talk is meaningless anyway. it has been stated att has the exclusive contract for another year. By that point, Verizon would be on the road to LTE and there would be no need to talk CDMA. CDMA only applies if Apple was releasing something new in the next 3-6 months.

    Of course, I can see iPhone users getting all excited by iPhone 3.0 coming with 4G support, talking up Apple being 'ahead of the curve'. Not that it will mean anything, since by the time 4G comes about for ATT, the phone will be two generations old and outdated...

  1. bjojade

    Joined: Dec 1969

    +3

    LTE a long way off

    It is going to take several YEARS before all of Verizon's network is LTE. Just like now, there are vast areas of their network that are not yet 3G. So, if they release an LTE only phone, it's only going to work in limited areas on Verizon's network. Obviously a non workable solution.

    Making a CDMA version of the iPhone wouldn't be all that difficult. Look at the competition. They make both versions. There would be no difference to the software apps as the phone communications are separate from the rest of the OS. Hackers would have two different hacking methods though.

  1. climacs

    Joined: Dec 1969

    +1

    originally

    the reason Apple forged a deal with a single carrier was the need to convince one of them to upgrade their network for iPhone. Way back in ought 6, far fewer folks had smartphones especially non-business users.

    That's no longer an issue. You bet there will be an end to the exclusivity deal, it won't make any sense for Apple to extend it and AT T can't possibly pay Apple enough to keep it going.

  1. testudo

    Joined: Dec 1969

    -3

    Re: originally

    Yes, because ATT had no plans whatsoever to upgrade their network, but Apple's iPhone convinced them.

    And if LTE is a long ways off, it only then makes perfect sense to make a CDMA line. Seriously. How hard is it to put a different network stack into the OS, and a different chip on the board?

  1. Salty

    Joined: Dec 1969

    -3

    Question

    Granted a lot of iPhones are probably sold out of ATT stores, but if Apple was carrying CDMA phones would you be able to buy both at the Apple Store? Won't that end up with a lot of people complaining about their cell phone bills at the Apple Store?

  1. vasic

    Joined: Dec 1969

    -2

    Not likely

    Contrary to the (very vocal) minority of contributors to these discussions, the difference between network coverage of AT&T and Verizon is minuscule and negligible.

    This Citi report assumes some absurdly high level of loyalty of Verizons customers. If iPhone continues to be the most coveted device, and others continue to be duds as they have been (Storm, Android, Pre), every single Verizon customer is there for the taking. AT&T needs to continue to expand their coverage and that ought to provide plenty of room for growth.

    Apple has nothing of significance to gain and too much to lose by opening to other carriers. With an exclusive contract, AT&T was willing to give up EVERYTHING. iPhone is the ONLY phone without MediaNET, AT&T Mall and other similar services. On every single other phone from AT&T, you can buy ringtones, walpapers, music, watch TV via AT&T's premium services for extra charge. Apple was able to prevent any of that from appearing on the iPhone. There isn't even an AT&T logo on the device!

    There is absolutely no way Verizon would agree to that. With an iPhone, carrier is just a commodity, providing connectivity and NOTHING else. Verizon is the world champion when it comes to crippling devices and tacking extra charges for every SINGLE feature and service.

    Citi is wrong. This isn't going to happen anytime soon.

  1. testudo

    Joined: Dec 1969

    +1

    Re: Question

    Granted a lot of iPhones are probably sold out of ATT stores, but if Apple was carrying CDMA phones would you be able to buy both at the Apple Store?

    Why not?

    Won't that end up with a lot of people complaining about their cell phone bills at the Apple Store?

    Why would that be any different than it is now? Apple stores would just point them to the ATT or Verizon store, or tell them to call customer service (which is exactly what those stores would tell you to do anyway).

  1. testudo

    Joined: Dec 1969

    +2

    coverage

    Contrary to the (very vocal) minority of contributors to these discussions, the difference between network coverage of AT&T and Verizon is minuscule and negligible.

    Well, you go look at coverage maps, and it sure looks different. There's a good hunk of VA and PA that have no coverage at all. Or do those places not count?

    And it isn't just a question of coverage, but of service quality and support. There are people who've been screwed over by ATT and will never use them again, just as there are those feeling the same way with Verizon or any other company out there (I won't deal with Comcast, for example).

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