Tradeoff may be worthwhile, says analyst

Apple will lose its current "sweetheart" US carrier subsidy if and when it signs an iPhone deal with Verizon, says Brian Marshall of Broadpoint.AmTech. The analyst argues that a Verizon iPhone will arrive in the second half of 2010, but with Apple unable to pressure the carrier into paying the same subsidy per phone required of AT&T, thought to be $450. A more likely Verizon figure is pegged at $300, which may contribute to thinning Apple margins.

The sacrifice may be worthwhile if Verizon sells an anticipated 14 million iPhones during 2011. At an unsubsidized cost of $500 per device, such sales would theoretically generate an extra $7 billion in revenue for Apple. Exact numbers could vary depending on how closely Verizon matches past AT&T performance; roughly 90 percent of September postpaid additions at AT&T were iPhones, and currently, the device represents a full 4 percent of the carrier's postpaid subscriber base.

The major obstacle to a Verizon iPhone remains technology. Whereas present AT&T models depend on GSM and HSPA, the most common cellular standards, Verizon primarily uses CDMA and EVDO. Convergence is generally expected to happen when both companies adopt LTE, also known as 4G. LTE networks may not be widespread until at least 2011.

by MacNN Staff