iPhone will help Verizon catch up to AT&T

Mike Roberts/Informa T&M
13 Jan 2011

Verizon's launch of the iPhone will help it close the gap on AT&T in the US smartphone market, where AT&T has built a sizable lead largely due to the iPhone.

In fact in 3Q10 AT&T had more than twice as many smartphone subscriptions as Verizon, with 49 million compared to 20 million at Verizon, according to Informa Telecoms & Media data.

That is a huge gap particularly given that smartphone subscriptions are one of the key growth drivers for mobile operators - for example smartphone subscriptions at AT&T have 1.7 times the ARPU of non-smartphone subscriptions.

Although launching the iPhone is great news for Verizon in the long run it will hit margins this year, given the steep subsidies associated with the device.

The operator is likely to have to provide a subsidy of $300-400 for each iPhone, similar to AT&T's iPhone subsidy, which could lead to a subsidy bill of $3-4 billion if Verizon sells 10 million of the devices this year, which is likely.

But it is a price Verizon will be willing to pay to land millions of new, high-value smartphone subscriptions.

For Apple the CDMA iPhone means expanding availability of the device to a segment of the US mobile market that has been unwilling to leave Verizon.

The availability of the CDMA iPhone does put significant pressure on AT&T because it now has to compete with what it widely perceived as the best network in the country.

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