A Verizon iPhone Could Double Apple's Sales: Analyst

Verizon iPhone rumors continue to circulate, with a rumor as recent as late April saying that Verizon and Apple were in talks over the device. On Monday a pair of analysts took a look at this issue, which will be increasing in importance as Apple's exclusive deal with AT&T, rumored to run through mid-2010, comes to an end.

A Bernstein Research analyst, Toni Sacconaghi, contended that by adding Verizon, Apple could boost sales by at least 2x in units, but at the cost of losing revenue per phone in the amount of $100 to $200.

“Verizon’s postpaid subscriber base is not only larger than AT&T’s, but more importantly, is untapped whereas we estimate more than 10 percent of AT&T’s postpaid users already have an iPhone. Since the iPhone first launched in June 2007, AT&T has reported activating 2.6M units of the first-generation iPhone and 5.9M of the iPhone 3G, for a total of 8.5M units through the end of March 2009. This represents 14 percent of AT&T’s total postpaid subscriber base of 61M; assuming 1.5M iPhones have already been retired (despite the fact that even the very first iPhone buyer is still on his/her two-year service contract), we estimate 11-12 percent of AT&T’s postpaid base currently uses an iPhone.

Within AT&T’s smartphone user base, we estimate the iPhone’s penetration is around 35 percent (given 32 percent of AT&T’s postpaid subscribers use smartphones – as confirmed by CEO Randall Stephenson). This suggests Apple has increasingly limited opportunity to attract new iPhone users within AT&T’s base; and if Apple maintains exclusivity with AT&T, iPhone sales will increasingly be driven by replacement sales, making it critical for Apple to introduce compelling new models.”

So, basically, reading through the numbers, the iPhone is starting to reach saturation among AT&T's subscriber base and Apple needs more victims, er, consumers who might be willing to buy the device. That would, you might think, not just include Verizon, but Sprint and T-Mobile, at least in the U.S.

Problem is, with although Sacconaghi feels that going with Verizon and ending exclusivity could lead to a doubling of unit sales, Sacconaghi also adds that AT&T, in response to this, might lower their subsidy of the device, meaning that Apple would have to raise the price that consumers pay.

Or maybe not. As All Things D states, if Apple incorporates other carriers into its iPhone "sales force," AT&T couldn't afford to tick off the Cupertino-based company, now would they?