AT&T Says Losing Apple iPhone Exclusivity Possible, But Not A Worry


A top AT&T executive on Thursday acknowledged that his company could lose its exclusive contract with the Apple iPhone, but brushed off concerns that such an event would have a major impact on AT&T.

Ralph de la Vega, president and CEO of the wireless unit of AT&T, discussed the possibility of losing iPhone exclusivity during his company's third-quarter earnings conference call.

AT&T said it had its best-ever third-quarter wireless subscriber gain, with the total number of wireless subscribers increasing by 2 million.

Also announced was a record number of iPhone activations. The company said that it registered 3.2 million iPhone activations, of which nearly 40 percent were customers who were new to AT&T.

Responding to analysts' questions about the possibility that AT&T might loose its exclusive contracts with the Apple iPhone, de la Vega admitted that it is possible, but that it would not have a major impact on his company.

He said that the iPhone accounts for only about one-third of AT&T's gross additions to its wireless subscriber base, but that it has a portfolio of other products that will drive growth in the future.

"We know (growth is) going to continue after the iPhone is no longer exclusive to us," he said. "And we think that we'll be able to continue with our growth with the iPhone and with other products that we think will be very attractive to customers."

AT&T invests a lot in new technologies it can bring to customers, and the iPhone has set the bar in terms of innovation and functionality, de la Vega said. However, more functionality requires the kind of network that AT&T provides to work as promised. he said.

AT&T is planning to roll out new products in the near future that capitalize on the fact that the company is one of the few which can provide simultaneous wireless voice and data transmission with smart messaging devices and smart phones, de la Vega said.

That is an important differentiator as customers depend more and more on their smart devices for both voice and data applications, he added.

What we have in our portfolio is just a smashing set of products that are going to come out to exploit that capability and differentiate us when it comes to that functionality," he said. "And also with speed. Keep in mind that, even if we lose the iPhone exclusivity, we're going to probably be the only one which has a speed of 7.2 (Mbits per second) that these phones can work on. So they'll work on our network faster than on anybody else's network."

Outsiders have been calling for Apple to end its exclusive iPhone contracts with AT&T, noting that such a move could mean a quick and significant boost to the iPhone's share of the smart phone market.

A podcast of de la Vega's comments can be found by clicking here.

Dropping exclusive contracts is already starting. Vodaphone last month said that it will start providing service for the iPhone 3G and iPhone 3GS in England and Ireland starting in 2010.

This follows an agreement unveiled in September between Apple and Orange under which Orange, a part of France Telecom, will bring the iPhone 3G and iPhone 3GS to U.K. customers later this year.

O2, part of Spain-based Telefonica, had been the exclusive provider of the iPhone in the U.K. and Ireland since July.

AT&T on Thursday reported that revenue in the third quarter of 2009 fell slightly to $30.9 billion compared to the $31.3 billion it reported during the same period last year. However, income remained flat year-over-year at $3.2 billion, or 54 cents per share.