January 11, 2011 4:51 pm

Verizon to sell Apple iPhone

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Verizon Wireless, the largest US mobile network operator, will begin selling a version of Apple’s popular iPhone smartphone next month, marking the end of an exclusive US agreement between Apple and AT&T that began when the original iPhone was launched in June 2007.

The February 10 launch is the first appearance of the popular phone on a type of network operated by Verizon and some other carriers, including some in China.

Verizon Wireless chief executive Lowell McAdam made the long-awaited announcement at a press conference in New York on Tuesday, stressing that Verizon’s network was more robust than that of rival AT&T.

“This is something customers have been waiting for for years,” Mr McAdam said. The company said pricing plans would be announced later.

Apple has been under growing pressure to make the latest iPhone available to other mobile network operators in the US following the success of smartphones from Samsung, Motorola and others based on Google’s rival Android operating system.

Last week, ComScore which tracks subscriber data, reported that Android topped the iPhone in US smartphone subscribers for the first time, accounting for 26 per cent of the market, compared with 25 per cent for Apple. Canada’s Research in Motion, which sells the BlackBerry family of smartphones, held onto the top spot with 33.5 per cent.

Analysts believe Verizon Wireless, a joint venture between Verizon Communications and Britain’s Vodafone Group, could sell between 5m and 13m iPhones this year and help maintain its status as the largest US network operator with more than 93m subscribers. Apple could see $6bn in additional revenue.

The announcement ends years of speculation about when the iPhone would become available from Verizon Wireless and is expected to spur a surge in customer defections from AT&T, whose network has struggled at times to cope with the heavy data usage by iPhone owners.

The new iPhone will operate on the Verizon Wireless 3G network, which uses a technology called CDMA (code division multiple access) rather than the UTMS technology used by AT&T and most other carriers, including Vodafone.

Ahead of the announcement, there had been some speculation that the new iPhone might operate on the new 4G high speed mobile data network which Verizon began to roll out across the US last month. That new network, based on a technology called LTE, permits download speeds 10 times faster than 3G.

Apple executives said on Tuesday that they were unwilling to wait for a full LTE roll-out and wanted Verizon customers to have iPhones sooner. They also cited design challenges for the needed chips.

The iPhone has proved very popular with US consumers – AT&T sold 11.1m iPhones in the first nine months last year.

AT&T has acknowledged that it was unprepared for the surge in data usage by iPhone owners. As a result there have been persistent complaints from US iPhone owners about dropped calls and other network problems.

Analysts estimate that AT&T pays Apple a subsidy of about $400 per iPhone. If Verizon Wireless is paying Apple a similar subsidy, Apple’s 2011 revenues could be boosted significantly. Apple’s revenue for the fiscal year ended in September was $65.2bn.

Piper Jaffray wrote on Monday that the Verizon could sell almost as many iPhones as AT&T in 2011, mostly from customers who would have been AT&Ts but adding a couple of million users who would have been untapped otherwise.

The shift could net Apple 2.5m new users, adding $5.9bn in revenue and $1.27 in earnings per share, 6 per cent above prior estimates, said Piper Jaffray’s Gene Munster.

Last week at the Consumer Electronic Show in Las Vegas, Verizon unveiled 10 new devices designed to run on its LTE network including four new Google Android-based smartphones which will be available before mid-year.

Verizon Wireless is the first US network operator, and one of the first major wireless carriers in the world, to deploy LTE technology. Its experience with the new technology is therefore being closely watched by network operators including AT&T which announced plans last week to accelerate plans for its own LTE network.

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