If, as long rumored, Verizon Wireless gets the iPhone next year, there's little doubt some AT&T customers with the Apple device would shift to Verizon. But how many? In a new report highlighted by MobileBeat, Credit Suisse took a crack at estimating the impact on AT&T. The Wall Street firm projects 23% of AT&T iPhone subscribers, or about 1.4 million people, would drop the carrier for Verizon in the event it begins offering the Apple phone. Ouch.
Bloomberg has reported on a supposed Feb. 15 launch date for the Verizon iPhone. A separate report indicated Apple has placed an order for millions of Qualcomm chipsets designed for the CDMA network architecture Verizon employs as opposed to AT&T's GSM network. Whether a Verizon iPhone will actually become a reality next year, though, is still a matter of speculation.
But if AT&T loses its exclusive deal for the iPhone, Credit Suisse predicts its wireless subscriptions will be roughly flat in 2011 as customers switch to Verizon or other carriers, rather than the 1.5 million to 2 million users AT&T would've added otherwise.
Nevertheless, the investment bank raised its rating for AT&T from "neutral" to "outperform," explaining that the carrier was undervalued compared to Verizon -- even its main rival picks up the iPhone next year. Credit Suisse estimates AT&T will produce a 20% return on shares in 2011.
But it's hard to see investors not punishing AT&T 's stock if it loses its iPhone exclusivity, given the key role the device has played in boosting its wireless business. Through the second quarter of 2010, the iPhone has accounted for 24 million activations and 30% of all new subscriptions in 2009 and 2010.
An exodus of iPhone users to Verizon also wouldn't serve as a great advertisement for AT&T's service, which iPhone users in New York City and San Francisco in particular have long complained about. AT&T has taken steps to improve network performance in the two iPhone-centric cities since the end of 2009
The eventual loss of iPhone exclusivity may be one reason AT&T has so aggressively touted the growth of its business in powering "connected devices" including e-readers, netbooks, digital photo frames, and GPS devices. In the second quarter, AT&T said it added nearly 900,000 connected devices for a total of 6.7 million. The growth in emerging devices helped the carrier increased mobile data revenue to $4.4 billion in the quarter, up from $396 million a year ago.