It’s official. Well, nearly official. After more than a year of rumors, Apple Inc. (NASDAQ: AAPL) and Verizon (NYSE: VZ) are all but certain to announce an iPhone exclusive to Verizon’s service tomorrow. And according to leaks, the Verizon iPhone’s rumored launch is February.
The new iPhone will be very similar in design to the AT&T (NYSE: T) model, the iPhone 4, which has proved massively popular since its June 2010 release. The only major difference is that the smartphone has been tweaked to meet the standard of Verizon’s 3G network.
But despite the fact that AT&T and Verizon iPhones are nearly identicial, there are three distinct reasons VZ will be winning the new iPhone carrier wars after the phone’s inevitable release:
Multiple iPhone Models (And Pricing) In 6 Months
The new Verizon iPhone will be released during the first quarter of calendar 2011, but it’s likely that this won’t be the only iPhone to be supported by the carrier this year. Apple is guaranteed to release a successor to the iPhone 4 on AT&T’s network this summer – and that will be the moment Apple brings parity to its multiple carrier support. It is speculated that the iPhone 5 will be the company’s major 4G device and will support both AT&T and Verizon’s networks, without the need for different hardware. Once this happens Verizon will relegate the “old” iphone to a lower price point, likely around $99, like AT&T has in the past twelve months with the older iPhone 3GS model. In short, two iPhones mean two price points for consumers in a short window. This will help Verizon ramp up market share faster.
The Great AT&T Exodus
Gene Munster, an analyst for firm Piper Jaffray, issued a note to investors last December that a Verizon iPhone likely won’t greatly increase Apple’s total iPhone sales for 2011 – projecting a boost of 2.5 million units to 20 million iPhones overall. but While that may not be huge for Apple, it’s certainly huge for Verizon. That’s because Munster believes the reason the total sales won’t jump that high is the majority of early Verizon iPhone buyers will be AT&T users migrating to Verizon’s network. Despite AT&T’s massive success with the iPhone—the company activated 5.2 million iPhones between July and October in 2010 alone—customer satisfaction has been notoriously low. Consumer Reports year-end consumer satisfaction survey, published in early December, saw 60,000 respondents name AT&T the worst carrier in nearly every category. This means that even if Apple isn’t selling dramatically more iPhones than they did in 2010, Verizon will be selling a whole lot more smartphones and two-year contracts.
The Return of “Antenngate”
One talking point that is sure to surround the Verizon iPhone when it’s announced on Tuesday is whether the new phone will experience the same antenna problems as the iPhone 4. The AT&T compatible iPhone 4’s problems with dropping calls due to a delicate antenna were well publicized last summer. Apple is sure to have ironed out those design flaws with its new Verizon iPhone, but the new device’s reliability will be greatly enhanced by the overall reputation of Verizon’s 3G network. A handheld that’s seen as a more reliable iPhone 4 coupled with a carrier with a reputation for stronger network support in major urban areas like New York and San Francisco—places where AT&T has always been plagued by spotty support and dropped calls—should guarantee that the Verizon iPhone is a hit with customers throughout the year.
As of this writing, Anthony John Agnello did not own a position in any of the stocks named here.
