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Why ATT Wants to Keep the iPhone Away From Verizon

pickens (49171) writes | more than 5 years ago

Businesses 0

Hugh Pickens writes "Saul Hansell of the NY Times has an interesting post analyzing AT&T's earnings report and highlighting the enormous stakes involved in the renewal of its exclusive contract to distribute Apple's iPhone in the United States. Hansell does some rough calculations: "If the average iPhone customer brings in $90 a month, or $1,080 a year in revenue, and the operating profit margin stays constant at 26 percent, that means an iPhone customer represents at least $561 in operating profit over a two-year contract," says Hansell. "Put another way, if the company gets 2.5 million new customers a year because of its iPhone exclusivity, the deal represents at least $700 million a year in operating profits — profits that it could lose if Verizon sold the iPhone, too." With that sort of numbers AT&T has every reason to make Apple an offer it can't refuse to keep its exclusive deal for another few years. Of course the incentives for Verizon are presumably the mirror image so expect Verizon to come to Cupertino, checkbook in hand, to see what sort of deal they can make. "The benefit of somewhat more iPhone sales from wide distribution is likely to be swamped by a huge bid from AT&T to keep exclusivity, and an equally high bid from Verizon to win some (or maybe even all) of the business for itself.""

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