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