NEW YORK — Verizon Wireless would seem to be a big winner after its expected announcement today that it will start selling the iPhone and break Apple’s monogamous relationship with AT&T in the U.S.
But for several reasons, the iPhone’s arrival to Verizon would be poorly timed, and Verizon’s gains won’t be as clear-cut as one might believe.
There’s no doubt a Verizon iPhone would attract millions of buyers, and it would give the country’s largest wireless carrier a chance to catch up with AT&T in attracting high-paying smartphone customers.
While the smartphone will help Verizon add more subscribers this year than rival AT&T Inc., currently the exclusive U.S. carrier for the iPhone, it will also crimp profits, said John Hodulik, an analyst at UBS.
Hodulik said Verizon might sell 13 million of the devices with an estimated $400 subsidy this year, which would add up to a total of $5.2 billion.
“You basically write customers a $400 check,” said New York-based Hodulik, who rates parent Verizon’s shares “neutral” and doesn’t own them. “We expect margins to be down pretty meaningfully in the first quarter and second quarter.”
Since the iPhone’s debut in 2007, AT&T has been its exclusive distributor in the United States. That means, for the most part, that the iPhone doesn’t work with other carriers, and anyone who wants an iPhone needs to get service through AT&T. Many people held back because they already had service with Verizon or another carrier they liked or were apprehensive about congestion on AT&T’s network, particularly in Denver, New York and San Francisco.
Rumors about a version of an iPhone for Verizon have swirled for years, but they have been rising in recent months. The Wall Street Journal has reported that an event Verizon is holding today is for a Verizon iPhone, which will go on sale at the end of the month. Verizon, Apple and AT&T wouldn’t confirm that.
The No. 3 and No. 4 carriers in the U.S., Sprint Nextel Corp. and T-Mobile USA, may have as much to lose from a Verizon iPhone as AT&T. They won’t have iPhones and would face the added competition from Verizon’s model. Sprint recently started reversing a multiyear subscriber loss.
Bloomberg News contributed to this report.
