AT&T: Losing Exclusivity Won't Crater Our Business


AT&T wants investors to know that its well-diversified line of smartphones will cushion the blow of losing iPhone exclusivity -- if that oft-prophesied scenario ever does come to pass.

The iPhone is AT&T's top selling smartphone, but in a 10Q filing last week, the carrier points to its "large variety of handsets" and its "continual introduction of new models" as reasons why investors shouldn't worry about a future in which it's not the sole carrier of a particular device.

The implication is that that losing iPhone exclusivity won't leave a mushroom cloud hanging over AT&T's business, as some analysts are predicting.

"We believe offering a wide variety of handsets reduces dependence on any single handset as these products evolve," AT&T says in the 10Q filing.

Even if Apple does start selling the iPhone through other U.S. carriers, AT&T doesn't expect a mass exodus of subscribers because more than 80 percent of its current subscribers are on Family Talk plans and business plans. These are group plans with benefits like free roaming and long distance, as well as the ability to roll over minutes, so anyone looking to switch would have to give some thought to the decision.

"As these exclusivity arrangements end, we expect to continue to offer such handsets (based on historical industry practice), and we believe our service plan offerings will help to retain our customers by providing incentives not to move to a new carrier," AT&T says in the filing.

AT&T also downplays the long term viability of exclusivity agreements as a competitive differentiator. The carrier acknowledges that the expiration of exclusivity could lead to more churn and slow customer growth, but says this wouldn't have a material impact on its business.

Calling out these points in its 10-Q could be AT&T preparing investors for the future, but it could also simply mean the carrier is sick of the never-ending Verizon iPhone speculation. In any event, the iPhone has been the ultimate paradox for AT&T, helping to boost revenue and subscribership but also subjecting the carrier to pressure to show it's doing all it can to update its network.

Although Verizon has made its desire for the iPhone well known, there's nothing to suggest AT&T is actually in danger of losing iPhone exclusivity. In May, Apple court documents surfaced showing that the original contract Apple and AT&T signed in 2007 was for five years, although no one knows if the ensuing service struggles the carrier has encountered have prompted a renegotiation.

Meanwhile, AT&T also has an exclusive with Research In Motion for the BlackBerry Torch 9800, RIM's latest attempt to cross over into the prosumer space. Windows Phone 7 devices are slated to arrive this holiday season, and AT&T claims to be Microsoft's "premier partner" for the launch, although neither company has explained exactly what this means and what benefits the status conveys.