AT&T is OK with the Forbidden Apple Swinging Behavior


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.

Source: AT&T, UBS

Overall though we, the consumer will benefit from spreading the phone out 🙂

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About Elias Shams
I have been a serial entrepreneur in telecom and social media space for past 12 years or so. I hold a M.S. degree in Telecommunication Engineering from the George Washington University and a B.S. degree in Electrical Engineering from the University of Maryland. I’ve lived and worked in many countries and cities including London England, Tehran Iran, Bonn Germany, Paris France, Alicante Spain, Delhi India, and my favorite of all Washington, DC of great US of A. Two of the greatest Washington, DC based companies I worked for and very proud of are Yurie Systems which was sold to Lucent in 1998 for $1.23 B and telezoo.com that I founded in 1999. I am currently the founder and awesomizer @ awesomize.me

4 Responses to AT&T is OK with the Forbidden Apple Swinging Behavior

  1. Adam Eustice says:

    I think the AT&T execs realize they see some customers leave for a Verizon iPhone, but it will be funny when people grab their Verizon iPhone and have all the same problems AT&T had with the iPhone on their network with slower 3G data speeds on top of all the call retention issues and the everyone will see that everything was Apple’s fault, not AT&T’s

  2. Gene Waters says:

    Adam your inner idiot is showing. Whats so funny about people having problems with their phone and what makes you think their will be a problem when they get their Verizon Iphones?

  3. The small % of issues with ip4 0.05 is the return rate because it’s apple the media had to make a big deal out of it and the people on this page that complain makes it really worse then it really is go down the line of the other smartphones and every single one has issues

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