Is Exclusive Apple (Nasdaq:AAPL) iPhone Deal with AT&T (NYSE:T) Ending?
Monday, March 29th, 2010
With the introduction of a new iPhone from Apple (Nasdaq:AAPL) which would work with a different technology now used by AT&T (NYSE:T) and others, it seems it signals the end of the current exclusive deal between the two companies.
AT&T uses what is called GSM technology, while the new iPhone would work with CDMA, a different type of wireless network.
Who would benefit from this would be companies like Verizon (NYSE: VZ) wireless and Sprint Nextel (NYSE:S), which use the CDMA technology with their wireless networks. Other regions also use the CDMA technology, including Asian countries like Japan and Korea.
This is more of a positive for the users of CDMA technology, as GSM is by far the widest used, although it will give a nice stream of income to Apple, just not the size of what they're getting now.
Still, it's not like Verizon is some smallish competitor, as they serve over 91 million customers in the U.S. at this time, and a good number of them would be sure to go with the new iPhone when it becomes available. Estimates are it could almost double the size of Apple sales in the U.S.
It also makes you wonder if the exclusive agreement with AT&T with the GSM technology would be ending with the introduction of the new iPhone.
You know that AT&T is dreading the day Apple expands its market beyond them in any way, as they have a 43 percent share of the smart-phone market in the U.S., with Verizon having 23 percent. If Verizon is given a shot at the iPhone, those numbers could change quickly, and if Apple goes beyond the exclusive GSM contract to other companies, it could devastate AT&T, which has almost solely relied on the iPhone for its growth since 2007.
Users of smart-phones generate higher revenue and profits, making them a highly desirable market segment to serve.
With more competition though, Apple may not be so quick to get rid of their deal with AT&T, which is estimated to pay somewhere around $600 a phone to Apple, while selling the majority of them for under $200 each.
Either way, it sounds like a shakeup in the industry, and Apple will definitely be the winner, as well as customers of Verizon and other companies hoping to get their chance to use an iPhone on their wireless networks.
Article by Gary B
The views expressed are the subjective opinion of the article's author and not of FinancialAdvisory.com
Tags: apple , at&t , gsm , iphone , smart-phone , sprint nextel , verizon
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