Phone Service Feature
September 22, 2010
AT&T Investors Worried over Potential Loss of Exclusive iPhone Contract
By Susan J. Campbell, TMCnet Contributing Editor
It seems investors are worried about the exclusive deal AT&T has with Apple for the iPhone (News - Alert). And, given the headaches the networks have had in the recent past, it is no surprise that rumors may swirl around the industry that a competitor – such as Verizon – may be better suited to usher in a new iPhone era.
According to a Market Watch piece, however, AT&T’s (News - Alert) CEO is assuring all concerned parties that there is plenty of growth yet to come in the smartphone market. Randall Stephenson was speaking at an investor conference sponsored by Goldman Sachs.
Stephenson acknowledged that while the iPhone 4 is driving a lot of AT&T’s smartphone sales – or integrated devices – he stressed that the sales are locking in many customers into long-term contracts that will not end just because the iPhone goes to another carrier. “If you look at the iPhone base, about 80 percent is either on a family-talk plan or in a business relationship with us,” Stephenson said. “Those customers tend to be very sticky. They don’t churn very frequently.”
AT&T investors have been worried about the potential loss of iPhone exclusivity, and with good reason. According to Stephenson, however, roughly two-thirds of the current iPhone customer base was already using AT&T before the iPhone became available. By contrast, one could also argue that AT&T didn’t have quite the network issues until it got the iPhone either.
The contract between AT&T and Apple (News - Alert) has not been made public, although Wall Street analysts believe the iPhone will be expanded to a new U.S. carrier, such as Verizon, by early 2011.
The concern surrounding the iPhone has helped to drive down the stock price of AT&T earlier this year. While shares have regained lost ground, the 17 percent jump since the launch of iPhone 4 may not be enough to sustain the company over the long term.
AT&T was upgraded to a buy rating on Monday by Credit Suisse. The broker noted that the carrier should be able to maintain its growth even if Verizon (News - Alert) gets the iPhone next year.
According to Stephenson, the smartphone market has more room for growth – nearly 80 percent of the carrier’s current sales are for smartphones and 53 percent of post-paid subscribers now use such devices. “We are in the very early stages of this connected-device market,” he said.
Will his words be enough if in fact the company loses that exclusive contract? Network issues continue and Verizon will be first to market with LTE (News - Alert) – this battle is a wait and see situation that is sure to heat up.
Recently AT&T was in the news, announcing the expansion of its netbook and notebook lineup, offering customers more choice with three new devices that can access the nation’s fastest mobile broadband network.
Susan J. Campbell is a contributing editor for TMCnet and has also written for eastbiz.com. To read more of Susan’s articles, please visit her columnist page.
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