AT&T adding smartphones as end of iPhone hold looms

By Greg Bensinger
(c) 2010 Bloomberg News
Friday, October 22, 2010; 4:14 PM

Oct. 22 (Bloomberg) -- AT&T Inc., facing the possible loss of its hold on the iPhone, is adding handsets at an accelerating clip and retraining store staff to help reduce reliance on its top-selling smartphone during the holidays.

The company's lineup this year will have ballooned by about 10 smartphones ahead of the holiday season to more than 20, including ones running Microsoft Corp. and Google Inc. software. Yesterday, AT&T reported the effort is showing early success, saying more than half of new customers chose a device other than the iPhone last quarter, up from 36 percent a year earlier.

"AT&T clearly has tried to diversify themselves away from the iPhone, and that's probably the right strategy since they've relied so heavily on the iPhone these past few years," said Chris King, a Stifel Nicolaus & Co. analyst in Baltimore. "This handset strategy could shelter them from some customer losses."

AT&T's exclusive U.S. contract to carry the iPhone may end in January, when Verizon Wireless will sell a version that works on its network, two people familiar with the plans said in June. AT&T, which has sold the Apple Inc. phone since 2007, risks confusing customers if it tries to compensate by giving them too much choice, said Craig Johnson, president of New Canaan, Connecticut, consulting firm Customer Growth Partners.

"It's a very fine line," Johnson said. "If you stuff your store with too much merchandise, you can overwhelm a customer and that can turn them off."

While the expansion to new phones is bearing early fruit, the iPhone is still Dallas-based AT&T's main device to lure users. The second-largest U.S. mobile carrier yesterday said it activated about 1.25 million new iPhone customers in the third quarter, nearly half its total of 2.6 million. A year earlier, new iPhone users made up about 64 percent of AT&T's additions.

Larger rival Verizon Wireless may sell as many as 9 million iPhones a year, according to Charlie Wolf, an analyst at Needham & Co. in New York. AT&T activated about 10.3 million iPhones last year.

The new AT&T devices include three smartphones each running on Microsoft's Windows Phone 7 and Google's Android operating systems. AT&T is now the only U.S. carrier to offer smartphones with every operating system available on the market, including Symbian, Palm and Research In Motion Ltd.'s BlackBerry. Its website currently lists about 16 different smartphone models.

"We made a conscious decision to give our customers a choice and let them decide what is best for them," Jeff Bradley, AT&T devices senior vice president, said in an interview. "We're probably there now, at a critical mass," he said.

The new devices aren't intended as protection for the end of AT&T's exclusive hold on the iPhone, Bradley said. "We plan to have the iPhone in our lineup for the foreseeable future" even after the exclusive deal ends, he said, declining to say when that will be.

To more effectively market its burgeoning device lineup, AT&T is revamping stores and retraining some 25,000 salespeople, John Dwyer, senior vice president, sales operations and customer experience, said in an interview.

AT&T has been training staff about the features of various smartphones and has redesigned stores for a "cleaner" look, he said. The stores will have differentiated sections for each smartphone brand.

CONTINUED     1        >

© 2010