Piper Jaffray: If AT&T loses exclusive iPhone deal, Apple gains

“Piper Jaffray just issued a report laying out the reasons why Apple is likely to sign up multiple carriers for the iPhone in the US, whenever its exclusive distribution arrangement with AT&T lapses (probably in mid-2010). Among the obvious facts—such as that the company has moved away from exclusives in every country where it has had them—are some interesting nuggets. For example, Apple’s share of the smart phone market in France has ballooned to 40%, from 15%, in just six months since carriers SFR and Bouygues began selling the iPhone along with formerly-exclusive partner Orange,” Peter Burrows reports for BusinessWeek.

“Also, the firm did a cost-benefit analysis on whether Apple should not only end exclusivity in the US, but also spend the money to develop and support a version of the iPhone that runs on the CDMA network technology used by market giant Verizon (which doesn’t support the current iPhone, which works on GSM technology),” Burrows reports. “While Apple would lose around $50 in subsidy per phone (just 10% of the total subsidy—so not a huge haircut) and incur around $25 in extra development costs per phone, these would be a small price relative to the increase in overall sales, Piper argues.”

Full article here.

24 Comments

  1. So will the consumer since we will see more competition in the data plans offered for the iPhone and the ones that will stick with AT&T;because we happen to have good coverage will benefit from data usage being spread out between more carriers currently unclogging AT&T;networks. Ether way, only AT&T;loses, everybody else wins.

  2. Ah, so that’s why Verizon is running the tag line “Pick the network first, not the phone”… AT&T;is in for some hurt if they don’t get their collective act together. But, I still have my doubts, because exclusive deals are the way our Telco’s work around here, it’s the ONLY way they think they can retain POWER over the customer…

  3. “”While Apple would lose around $50 in subsidy per phone (just 10% of the total subsidy—so not a huge haircut) and incur around $25 in extra development costs per phone, these would be a small price relative to the increase in overall sales, Piper argues.””

    $75 is 17% of the ASP (average sale price) of an iPhone (a third of the iPhone’s Gross Margin). We are way to early in the iPhone’s life cycle, to be giving up that much margin for the sake of more sales.

  4. Remember, folks, and once again . . . the Verizon “Droid” is VAPORWARE! V-A-P-O-R-W-A-R-E!

    There’s not even a firm time frame announced for its release! Just another BigAssTable/PinkPhone/iPhoneKiller thrown with hopes and wishes to the “pundits” for their blog-fodder.

    If and when such a Verizon device ever appears, just wait until it leaves the imaginary hands of “experts/analysts” and falls into the grasp of the real world (which is teenagers, techie malcontents, newbies, the idon’tcaries, and my wife). THEN we’ll see how it stands up. (“Pre,” anyone?)

  5. “So will the consumer since we will see more competition in the data plans offered for the iPhone”

    No, we won’t. iPhone plans will remain expensive as hell. Just watch.

  6. Non GSM providers = more problems with visual voicemail, and more chipsets (GSM and CDMA) for Apple to build for.

    Most of the world uses GSM and it would make sense for:

    1. Apple to remain with GSM only to limit engineering and development and support issues

    2. Verizon to switch to GSM or add GSM to its network.

    The era of two tiers of transmission protocols needs to come to an end at some point. Ridiculous.

  7. Hey there “these would be a small priceYuh cannot have it both ways”…it’s either this would be a small price OR these would be small prices.

    You have to decide in favour of singular subject, singular verb or plural….

    Who’s on first? Who?

    Back to the subject: In Canada, the rumour is that Bell will soon pick up the iPhone (that is if there are ever enough to actually stock the shelves), so Rogers wouldn’t be exclusive in Canada. Bell and Telus are building a compatible network but as always the countryside is ill-served, so there you need a land line. This is a major constraint on cell phone sales.

  8. If you look at the way Verizon handicaps and severly restricts the way it’s coustomers use a phones features I do not think they will accept the iPhone on thier network. Cause Steve Jobs, and therefore Apple will have none of that.

    If they did let the iPhone onto thier network I predict they would have a massive revolt on their hands and end up losing their entire current bussines model in the process.

    I just don’t see it happening. But it would be fun to watch if it did.

  9. ATT contract is up this coming year. They ether pay Apple to keep the exclusive, or Apple goes with other carriers. Etherway, Apple wins. I think ATT will pay to keep the exclusive, but this may not be a good thing for consumers, because it would mean less money for infrastructure upgrades and less choices of carriers. We will see what happens.

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