Market Watch

Verizon to Carry iPhone in the US


Display Driver IC Forecast


Leading US mobile operator Verizon will start carrying the Apple iPhone 4 from February 2011.

The agreement marks the end of AT&T's exclusive distribution of the handset, which was in effect since the first iPhone launched in June 2007.

The iPhone carried by Verizon requires different components to operate on the CDMA network (AT&T uses GSM and UMTS for its network). Since the agreement is non exclusive, the CDMA iPhone is likely to launch on other networks (Sprint in the US, but also operators in Asia).

By the end of Q3 2010, Verizon and AT&T were neck-and-neck with around 93 million subscriptions each. Verizon with a slightly higher average revenue per user ($51 vs. $50).

Analysis
AT&T's exclusive distribution of the iPhone has been marred by reception issues in dense urban areas such as San Francisco and New York, whose rather tech-savvy population helped create an acute publicity problem for AT&T and, by association, Apple.

Despite this, AT&T has activated more than 30 million iPhones since launch, including over 20m in the last 18 months.

The iPhone has undoubtedly helped AT&T significantly grow its smartphone user base, and the loss of the exclusivity, inevitable as it might have been, is still likely to negatively affect AT&T, starting with iPhone users in poor service areas.

Reducing the Verizon iPhone to a temporary churn boost would however be an oversimplification. US network coverage varies so much that AT&T simply wasn't a viable option for many customers. The launch on Verizon, and eventually on other US carriers, will grow the addressable market to a much wider base and therefore will benefit Verizon and Apple greatly.

AT&T had time to prepare for the loss of exclusivity, as the launch of Windows Phone 7 and the Blackberry Torch in Q4 2010 can attest. AT&T is likely to support Android more actively as well.

The launch on Verizon will ultimately serve as a very important test on the US competitive position of iPhone, Android and Blackberry. All three will finally be offered by the two leading operators. Q2 and Q3 (when new iPhone models are expected) could therefore be defining moments in the mobile platform race. Screen Digest expects Android to lead in unit shipments but Apple should maintain a large lead in handset revenue.

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