John Paczkowski

Recent Posts by John Paczkowski

Forty Percent of AT&T’s iPhone Subscribers Could Flee to Verizon

imagesWhat will AT&T’s post-paid subscriber numbers look like if the company loses its iPhone-exclusivity deal with Apple and if Verizon begins selling the device, as some believe it soon might?

The numbers will look about six million subscribers lighter than today, according to Davenport & Company analyst Drake Johnstone, who believes AT&T (T) will take a nasty hit if/when Verizon (VZ) receives Apple’s (AAPL) blessing to sell the iPhone.

“Over the past several years, AT&T indicated that 40 percent of its new iPhone customers came from other carriers,” Johnstone theorized in a note to clients this week. “We estimate that AT&T has 15 million iPhone customers (as of Q-1 10) and believe that AT&T could lose as many as 6 million, or 40 percent, of its iPhone customers when Verizon begins selling the iPhone in 2011.”

As a consequence, the analyst noted that “We are reducing AT&T’s 2011 wireless subscriber additions from 6 million to 2 million (most of these new additions may be lower value connected devices such as eReaders instead of higher value long-term wireless customers), since we believe that Verizon could obtain Apple’s approval to sell and provide wireless service for the iPhone as early as mid-2011.”

A 40 percent drop in iPhone subscribers. Six million AT&T customers gone with the advent of a Verizon iPhone. That’s an ugly scenario for AT&T, for which the device has been a major driver of wireless revenue growth.

But it’s not necessarily an inevitable one. As I noted here just yesterday, subscriber losses triggered by the end of AT&T’s iPhone-exclusivity deal will be tempered by two very important factors:

  1. The early termination fee AT&T charges customers who break their contracts.
  2. Family-talk and business-discount plans that make switching to a new carrier a difficult proposition. About 80 percent of AT&T’s customers are on such plans.

Beyond this, there’s the simple fact that subscriber churn rates at carriers that have lost iPhone exclusivity hasn’t been all that bad. As Matthew Key, CEO of Telefónica Europe said during a February earnings call, “ever since Vodafone has started selling the iPhone in January, we see absolutely no evidence of people leaving us, churning on the iPhone going back to Orange or Vodafone, so [we are] very comfortable with our iPhone volumes. We continue to out-trade the market and no sign of churn whatsoever.”


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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik