Will Apple kill AT&T exclusivity and strike a deal to bring the iPhone to Verizon? A Verizon iPhone has been the subject of much speculation throughout 2009, especially now that AT&T is losing favor with subscribers left and right. But at least one mobile market analyst still sees an Apple-Verizon agreement as something of fantasy.
The problem, argues Kaufman Bros. analyst Shaw Wu, is that both Verizon and Apple have "customer control" goals and it's those goals -- Apple with its App Store and Verizon with its V Cast services, for example -- that will keep them from reaching an agreement.
"Apple controls the media experience with iTunes and VZ [Verizon] with its V Cast service," wrote Wu in a research note Wednesday. "Moreover, Apple gets very favorable economics with an overall iPhone [average selling price] of $611 and at AT&T, we estimate it is higher at roughly $700. RIM, who is by far VZ's largest smartphone supplier, only has an ASP of $340, Palm's ASP is $436 and we estimate Motorola's Droid ASP is roughly $450."
Apple's exclusive carrier agreement with AT&T for the iPhone is widely expected to end in 2010, and the iPhone has already been opened up to other carriers abroad in what were once exclusive markets. A recent study from Consumer Reports found that many AT&T subscribers were frustrated with aspects of AT&T's iPhone service.
Verizon originally was pegged as the most likely choice for Apple to expand iPhone coverage in the U.S., but a recent war of words and images between Verizon, AT&T, the Motorola Droid and the iPhone has done much to dilute Verizon iPhone excitement.
In recent days, T-Mobile has emerged as a much-buzzed-about alternative for iPhone carriers. Thomas Weisel analyst Doug Reid told The Street on Monday that T-Mobile makes the most sense for Apple because the GSM version of the iPhone that Apple manufactures for AT&T's network would also work for T-Mobile's.
In the Kaufman Bros. note, Wu concurs, adding that both T-Mobile and Sprint would be more compatible with Apple's goals than Verizon. Wu also notes that "from a technology perspective, we believe T-Mobile may have an advantage with a similar 3G UMTS/WCDMA network as AT&T." Wu further advised that AT&T could extend its contract with Apple, and that a last-minute extension when the contract runs out -- most analysts believe that will happen sometime in the summer of 2010 -- wouldn't be a surprise.