AT&T is OK with the Forbidden Apple Swinging Behavior
August 10, 2010 4 Comments
As Apple getting reading to become a swinger and ends her three years exclusive relationship with her man, At&t, AT&T is gearing up to assure their suger daddies, the investors that the Apple’s threesome or possibly foursome with other carriers will not have a “material negative impact” on their earnings.
Although, most media and bloggers are not buying At&t’s arguments listed below, but I think the company has a case here. Here is why and how:
From their 10-Q SEC they filed last Friday, it looks like AT&T’s profit rose nearly 26% in the last quarter to $4.01 billion. Driving that growth was 1.6 million new wireless subscribers. Thanks mainly to iPhone.
However, At&t argues in the filing that 80% of its contract subscribers are on family or business plans. Thus, under their logic, the majority of subscribers will not switch because it will be too difficult to transfer an entire group and these “group” subscribers will be hesitant to relinquish certain AT&T perks like the rollover minutes they’ve accumulated.
AT&T also points out that the iPhone was specifically designed to work with AT&T’s network and technology, and thus a different version may lose some of the functionality.
I don’t quite agree with their second argument. Just yesterday, I blogged about an order for millions of CDMA chipsets from Qualcomm for iPhone by Apple. CDMA is the wireless technology used by both Verizon Wireless and Sprint. This means Apple is making sure their iPhone works with other carrier’s network.
I spare you with the rest of their arguments, you can go through it via the link I provided above.
AT&T is certainly laying the groundwork for a post iPhone exclusivity world including:
a) Getting serious about Android with the Captivate.
b) Keeping up with their Blackberry offerings.
c) Plus they are looking to bet heavily on Windows Phone 7.
This leads to going back to having a well rounded portfolio of phones rather than relying on the iPhone to keep everyone on their service.
I also think At&t will most likely sell more high end Android phones than Verizon would sell iPhones.
The exclusivity goes both ways, while At&t has had few low end Android options thus far, they purposefully didn’t take any high end Android device like Nexus One, HTC Desire or like Droid. The Samsung Galaxy S is the first high end Android phone on AT&T. And, Sony Ericsson X10 that was just announced. Here is a image and video of it:
Also, getting to sell Android on AT&T means more profits per phone for AT&T, as they are paying currently $650 per iPhone, they would only have to pay $400 per Android phone.
This same reasoning is why Verizon will never care to pay as much per iphone as AT&T has been paying under exclusivity. Seems to me the company to loose most from the end of the AT&T exclusivity is Apple. As once the exclusivity is finished, both Verizon and AT&T won’t have to pay more than $400 per iPhone. Effectively, Apple’s profit margin per iphone will be halved overnight.
The other factor many people including the investors don’t realize is the At&t’s operating cost to generate revenue from iPhone. Although, iPhone users have significantly contributed to At&t’s income — but the company has gone though hell to spend $$$ billions on their network upgrades to keep their iPhone users satisfied. So, looking at the graph below, the orange bars might decrease for At&t and increase for other carriers once the exclusivity over. As more people might move to Verizon from At&t, the data usage of the two networks would even out. Verizon’s will get more congested and AT&t’s less congested.
Overall though we, the consumer will benefit from spreading the phone out 🙂