Update: Verizon iPhone launch

As an update to our previous post, Verizon introduced the iPhone Tuesday and provided select details about the launch including:

- Pricing: 16GB for $199, 32GB for $299
- Data plan: no formal announcement, but expected to be unlimited data for roughly $30-$40
- Availability: Feb 3 for existing subscribers, Feb 10 for new subscribers

Most commentary surrounding the launch in centered on the network differentiation (no simultaneous voice and data on Verizon), and the lack of LTE support. Telwares maintains its earlier key observations:

- AT&T’s quarterly churn numbers could jump significantly if there’s a mass exodus, but that’s not likely. A vast majority of AT&T’s installed base of iPhone users are tied to family or corporate plans, making it more difficult to switch without prohibitive financial penalties.
- The most significant difference (and differentiator) in the network offerings of AT&T and Verizon is the ability to talk and use data simultaneously – an advantage AT&T has leveraged in the marketplace since launching 3G services.
- The network capacity and quality issues caused by an overwhelming amount of data traffic on AT&T’s network could replicate themselves on Verizon’s network as well. While Verizon maintains their network is ready to handle the demand, there’s no guarantee and no way to predict what actual demand will be.
- Verizon will have 7 to 9 million iPhones in its subscriber base by the end of 2011.
- The most interesting metric to observe, if the announcement happens as planned, will not be the bleeding of customers from AT&T to Verizon – it will be the battle for market share between Android, Apple and RIM in the Verizon customer base.

Verizon to announce iPhone offering today

According to multiple sources, including the Wall Street Journal, Verizon will formally announce later today the carrier will begin offering the Apple iPhone at the end of January. This will mark the end of AT&T’s exclusivity deal with Apple regarding the devices, but also represents a pivotal moment for both AT&T and Verizon in terms of Wall Street and network performance.

The impact to AT&T could be substantial given the network capacity and quality issues that subscribers have reported, leading to frustrations that could result in a switch of service providers. Quarterly churn numbers could jump significantly if there’s a mass exodus from AT&T, but that’s not likely. A vast majority of AT&T’s installed base of iPhone users are tied to family or corporate plans, making it more difficult to switch without prohibitive financial penalties.

The network capacity and quality issues caused by an overwhelming amount of data traffic on AT&T’s network could replicate themselves on Verizon’s network as well. While Verizon maintains their network is ready to handle the demand, there’s no guarantee and no way to predict what actual demand will be. For example, several studies have cited that Android users (the bulk of Verizon’s non-Blackberry smart phone portfolio) use more data than current iPhone users on AT&T’s network.

Perhaps the most significant difference (and differentiator) in the network offerings of AT&T and Verizon is the ability to talk and use data simultaneously – an advantage AT&T has leveraged in the marketplace since launching 3G services. This functionality is important to many subscribers, and may prove problematic for Verizon if the majority of potential new subscribers are not aware of the technology difference.

The most interesting metric to observe, if the announcement happens as planned, will not be the bleeding of customers from AT&T to Verizon – it will be the battle for market share between Android, Apple and RIM in the Verizon customer base.

Given the announcement is still pending, Telwares believes:

- Verizon will announce the iPhone with an unlimited data plan, attempting to lure dissatisfied AT&T users across carrier lines and attracting smart phone upgrades within their installed base of subscribers.

- Verizon will have 7 to 9 million iPhones in its subscriber base by the end of 2011.

- Verizon will not experience the network issues that AT&T has endured; all service providers are now beyond the shock factor of data usage from smart phones, and Verizon has the advantage of the lessons learned from AT&T’s deployment.

- AT&T’s quarterly churn numbers will be moderately impacted, but will not drastically impact stock price during 2011.

Sprint 4Q08 Earnings

No surprises here, except for a bright spot that Sprint managed to come in close to (poor) expectations. As we pointed out in a previous entry, the majority of the forward looking statements revolved around the continued commitment to churn reduction, the focus on cost cutting, debt management, and the launch of the Palm Pre – which for Sprint must be a game changer and a real competitor to the iPhone. While the numbers were not good in contrast to their competitors, there seems to be some stabilizing of metrics (the reduction of the churn number was substantial) – this is critical to maintain shareholder confidence and the market perception of viability.

From Reuters:

*Q4 shr loss $0.57 vs $10.31 shr loss a year ago

*Q4 rev $8.4 bln vs Street view $8.5 bln

*Q4 postpaid subscriber losses 1.1 mln

*Sees subscriber loss improvements in 2009

*Shares closed Wednesday at $2.71 on NYSE

NEW YORK, Feb 19 (Reuters) – Sprint Nextel Corp (S.N), the No. 3 U.S. mobile service, posted a quarterly loss on Thursday and said a total of 1.3 million wireless customers had left its service during the quarter.

Sprint, which has struggled with customer defections in the last few years, reported a loss of $1.6 billion, or 57 cents per share, compared with a loss of $29.3 billion, or $10.31 per share, in the same quarter a year earlier when it had a big charge.

Revenue fell to $8.4 billion from $9.8 billion a year earlier.

The company lost 1.1 million postpaid customers who pay monthly bills in the quarter, in line with average analyst expectations, according to 4 analysts contacted by Reuters. It said total wireless customers declined 1.3 million in the quarter.

Sprint expects subscriber losses to improve in 2009. It said 2009 capital spending will be consistent with 2008 levels, excluding spending on high speed wireless WiMax technology.

It expects to continue to generate positive free cash flow during 2009. (Reporting by Sinead Carew; Editing by Derek Caney)