mocoNews - Apple Could Double iPhone Sales With Verizon Wireless, But There's Downsides Too

Tricia Duryee
Monday, June 1, 2009; 3:00 PM

Here's the deal: Apple (NSDQ: AAPL) could likely double sales of the iPhone by ending its exclusive arrangement with AT&T (NYSE: T) and adding Verizon Wireless (NYSE: VZ) as its next distribution partner. However, a deal of that kind could cost Apple dearly?up to $200 a phone.

Bernstein Research analysts Craig Moffett and Toni Sacconaghi wrote in a research note this morning that by adding Verizon, Apple could boost iPhone sales by at least 100 percent, but AT&T would likely reduce its subsidy per phone from an estimated $450 to around $250 to $350, Barron's reports. In that scenario, Apple would have to charge customers more for the phone, or it would have to eat that cost, and lower margins on each device sold.

Adding Verizon, could be worth it. Verizon is the largest U.S. carrier, and while more than 10 percent of AT&T's subscribers are iPhone users already, all of Verizon's roughly 87 million customers are untapped. The analysts believe that having to build a new CDMA iPhone for Verizon is not a big deal (as we've already reported), and will inevitably the two will work together. But negotiations right now are likely focused on Apple's margins. If they breakdown, Apple could go down another road with Verizon, and skirt the exclusivity provision by rolling out a non-iPhone device, like a tablet.


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