John Paczkowski

Recent Posts by John Paczkowski

An LTE iPhone Could Send Some Customers From AT&T to Verizon

Blackpool Creative

Launched exclusively on AT&T in 2007, the iPhone has remained more of a boon for the carrier than any rival that gained on it in the years that followed. Indeed, in the second quarter of 2012, AT&T activated 3.7 million iPhones, a million more than archrival Verizon was able to in the same period. But that could change with the debut of an LTE-capable version of the Apple handset.

AT&T’s LTE (long term evolution) network is not nearly as broad as Verizon’s. And because of that, the debut of an LTE iPhone could put it at a competitive disadvantage.

“As of the end of 2Q12, Verizon’s LTE network covered 230 million POPs, more than all the other carriers in the U.S. combined,” Jefferies & Co. analyst Thomas Seitz said in a note to clients. “We believe this network advantage could lead to a share shift towards Verizon, primarily at AT&T’s expense.”

According to Seitz, the debut of an LTE iPhone could cause a modest decline in AT&T’s share of U.S. iPhone sales — to 45 percent in the third quarter of 2012, from 47 percent in the second quarter of 2012.

Ironically, that could be further compounded by the company’s past success. Seitz notes that AT&T sold nine million iPhones in the third and fourth quarter of 2010, and many of those customers will likely be coming off contract right around the time Apple’s next-generation iPhone launches. For them, Verizon’s broader LTE coverage could be a compelling reason to switch carriers — assuming the next iPhone supports LTE.

It’s important to remember, however, that AT&T does have some measures in place to protect itself against scenarios like these. As Wells Fargo’s Jennifer Fritzsche reminds us in a note of her own on the same subject, about 88 percent of AT&T’s customers are either signed to a family plan or benefit from a corporate discount. And that will likely make them less inclined to switch carriers.

“We would remind people what we (and others) learned in 2011. In Q2 2011, when Verizon received the iPhone there was much fear that AT&T would lose a significant amount of customers,” Fritzsche says. “At the time, the Street had forecasted that AT&T would lose 1MM postpay subscribers in 2011. As we now know, AT&T actually added over 1.4MM postpay subs that year and postpay churn was up only 8 basis points year-over-year.”

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There’s a lot of attention and PR around Marissa, but their product lineup just kind of blows.

— Om Malik on Bloomberg TV, talking about Yahoo, the September issue of Vogue Magazine, and our overdependence on Google