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AT&T To Apple: Come On, What's Two More Years?

With their existing relationship set to expire this year, AT&T is pushing Apple to extend exclusivity contract.

According to a report in The Wall Street Journal AT&T is pushing Apple to continue the carrier's exclusive rights for the now-iconic iPhone for two more years.

Quoting unnamed sources, the Journal wrote that AT&T CEO Randall Stephenson is looking to continue AT&T's iPhone exclusivity through 2011. The pair's existing relationship is set to expire this year. AT&T has been the iPhone's exclusive carrier in the U.S. since the 2007 launch of the first-generation iPhone and continued through with the Apple iPhone 3G that was released in 2008.

Apple has been tight-lipped about its future iPhone carrier plans, telling the Journal "we have a great relationship with AT&T."

The iPhone has been a cash cow for AT&T since its 2007 launch—it is estimated that roughly 17 million iPhones have been sold in just two years. In the second half of 2008, AT&T added 4.3 million iPhone subscribers, 40 percent of whom were new customers for AT&T.

Apple and AT&T's original accord was to expire in 2008, which would have enabled the iPhone to be picked up by competing carriers, such as Verizon Wireless and T-Mobile. Last August, the two companies agreed to extend the deal through the end of this year.

AT&T has been chided in the past for its costly service plans around the iPhone and, most recently, has shown signs that its iPhone exclusivity is wearing it down. For example, earlier this year AT&T announced it would start selling contract-free iPhone 3G models for $599 and $699 to whittle down overstock. In addition, the carrier began offering refurbished iPhone models at a deep discount.

Extending the contract through 2011 would give AT&T exclusive rights to carry the next new iPhone that hits the market, which could happen as soon as Apple's Worldwide Developers Conference (WWDC) in June. Locking down exclusivity now means AT&T would capture all two-year contracts fueled by a new iPhone.

Word of a possible contract extension comes on the heels of a China Times report that indicates that Apple has ordered 4 million new iPhones for the second quarter, comprising three separate new iPhone models. One of the new models is expected to be an EDGE-based smartphone, while another will run on the 3G network. The third new iPhone is rumored to be made exclusively for the Chinese market.

Further fueling rumors of a new iPhone was last week's report that Apple had bought 100 million 8 -B NAND flash memory chips from Samsung and other suppliers, which could be used to build 16-GB, 32-GB and 64-GB devices. That mass memory purchase falls in line with analyst reports that indicate Apple is building a 32-GB iPhone 3G model to complement the existing 8-GB and 16-GB smartphones. An iPhone with more storage capacity would be better suited to support new memory-intensive features like video recording and a higher-resolution camera.

Another catalyst for a new iPhone was the announcement of iPhone OS 3.0 software last month, which adds a host of new features to the smartphone, including copy and paste, multimedia messaging. iPhone OS 3.0 software is expected to be available in the coming months.

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