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Apple Stock Watch
Analysts: iPhone Sales Could Double with Verizon at the Cost of Lower Subsidies
Monday, June 1st, 2009 at 5:10 PM - by Bryan Chaffin
Bernstein Research analysts Craig Moffett and Toni Sacconaghi believe that Apple could double iPhone sales by ending its exclusive agreement with AT&T and adding Verizon as a second carrier for the device in the U.S., but that if it did so, it would likely come at the cost of substantially lower subsidies paid on each iPhone sold.
Barron's reported that the two analysts said the balance for Apple lies between maximizing its subsidy-per phone and being to able to sell to the "addressable market," the portion of the total market that wants an iPhone but is not willing or able to switch to AT&T to get it.
If the company did add a second carrier, the two believe Apple's iPhone sales could increase by 100% in the U.S., Apple's largest market for the device. The cost would be a decrease in the subsidy paid by AT&T from roughly $450 per phone to something in the $250-$350 range, substantial decreases.
The research note allowed that Apple and AT&T can grow market share and keep their exclusive deal, and offered three examples of measures the two companies could take. AT&T could offer hardware discounts and/or lower the price of its data plans, and Apple could add a lower-priced entry level model iPhone to reach those with less money to spend on a mobile phone.
As an analyst, Ms. Sacconaghi has a rather mixed record when it comes to Apple, with many of her research notes finding fault with Apple for not following the business models of its competitors or urging the company to adopt those business models.
The basic gist of this note, however, was more of an analysis of what would happen when and if Apple were to add Verizon as a second iPhone carrier. There has been much talk of such a possibility as AT&T let it be known that the company was pleased with its exclusive deal with Apple, and wanted to renew it.
Apple's five year exclusive contract with AT&T is into its 3rd year.
Shares in Apple ended the day higher at $139.35 per share, a gain of $3.54 (+2.61%), on moderate volume of 16 million shares trading hands.
*In the interest of full disclosure, the author holds a small share in AAPL stock that was not an influence in the creation of this article.
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