Verizon-Apple Partnership – Could End of Carrier Exclusivity Shoot iPhone Sale Price Up?

News | Saturday October 24 2009 6:58 PM | Comments (0) Tags: , , , , , , , , ,

According to a note to investors from Broadpoint.Amtech's analyst Brian Marshall, this new partnership between Apple and Verizon is very likely to happen and could consequently lead to the reduction in the subsidy offered by AT&T to its customers. Currently, the subsidy stands at close to $450. However, with a non-exclusive carrier rights in place, this subsidy might come down to $300 which means that the customer must pay an additional $150 upfront to buy an iPhone .
Despite the rise in prices, Brian sees an increase in the volume of iPhones sold due to the new partnership with Verizon. He estimates an approximate 14 million iPhones to be sold by Verizon in 2011 that could see Apple earn as much as $7 billion in revenues.
Though Brian is right in his assessment that a non-exclusive partnership is likely to reduce subsidies and hence increase the product prices, it does not completely portray the ground realities. Opening up the network to include Verizon itself is likely to impact the revenues of AT&T highly considering the fact that over
is just from the sale of iPhones. With such a heavy reliance over the sale of iPhones, it is unlikely that the AT&T management would agree to increase the price of the iPhones, which will reduce their target audience.
Also, with
about the low quality of service, AT&T cannot play on value and has to play plainly upon volumes in order to acquire and retain customers – something that Verizon shall be less worried about. A likely scenario would then be an option for new customers to either go for a lower priced iPhone with AT&T contract or a higher priced handset with Verizon. Geographical factors could also come at play with AT&T likely to raise the price of the
in regions where their network is at par or better with Verizon's network quality.
I think AT&T will definitely play the pricing game whenever its iPhoneexclusivityends and would be in a better position by that time in terms of network coverage and performance as they're working hard to address the issues caused by the surge in data usage since the launch of the iPhone .
A lot of our readers had expressed a desire to move to Verizon in our earlier post on this topic.In a hypothetical scenario of differential pricing where iPhone customers might be required to shell out more money for a Verizon powered handset, would you be still willing to go with Verizon? Please tell us in the comments.

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