Complicated Apple-Verizon deal unlikely
Given the dissatisfaction of iPhone users with AT&T, and the fact that Verizon has a much better network, it has been hoped that Apple would strike a deal with Verizon. One analyst is saying no.
Analyst Shaw Wu of Kaufman Bros thinks that it is more likely that the iPhone will be carried by T-Mobile or Sprint in 2010 than by Verizon, something that would disappoint many current and potential iPhone users. Shaw says one major stumbling block is that both Apple and Verizon have grown their businesses through close control of their customers and that this shared trait may keep the two apart. After all, both parties cannot really control a shared customer.
Wu says, “Apple runs its own App Store and VZ has aspirations to do so. Apple controls the media experience with iTunes and VZ with its V CAST service. 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 smart phone supplier, only has an ASP of $340. Palm’s ASP is $436 and we estimate Motorola’s Droid ASP is roughly $450.”
As reported in an AppleInsider story, Wu thinks that there are a number of factors that make an Apple-Verizon deal “complicated” and therefore unlikely to happen in 2010 because an agreement will take too long to hammer out. In addition, Wu said, “While we believe VZ is likely inevitable at some point when 4G technology rolls out in 2012 or so, we believe Sprint and/or T-Mobile are more willing partners for Apple in helping maintain margins and customer controls. From a technology perspective, we believe T-Mobile may have an advantage with a similar 3G UMTS/WCDMA network as AT&T.”
If Wu is right, even if Apple looks elsewhere after its exclusive iPhone contract with AT&T expires in 2010, it will not be looking too hard at Verizon. The long-hoped-for combination of the user favorite iPhone handset with the user-favorite Verizon network may have to be put off for as long as three years, a significant blow to users that were hoping for an early and happy marriage.
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December 5th, 2009
Both Verizon and Apple have a history and culture of demanding control far more advantageous to themselves than their partners and customers. Not always a bad thing, it’s doubtful iTunes would have gotten the go ahead from the Media companies without it.
Verizon is notorious for crippled firmware in order to sell extra services. And judging by the lack of profitability the iPhone has brought At&T, it looks to me Apple needs Verizon more than the other way around.
AT&T can’t afford to upgrade their network to keep the people that are willing to pay a premium and voraciously consume bandwidth happy and locked in.
AT&T putting out those lame and embarrassing Luke Wilson smacked of desperation. Anyone who would actually understand the Verizon poke at a lack of 3G coverage is also going to see that as well.