Why Verizon needs iPhone

AT&T iPhone vs Verizon Smartphones

iPhone has decimated Verizon's growth, Google is uncertain ally, and Android is simply not competitive with iPhone to the degree Verizon may have had to give in to Apple's demands in order to launch a Verizon iPhone is 2011. That according to Horace Dediu of asymco who breaks down the numbers Matthew Goodman, a research analyst at ITG Investment, claims may represent Verizon's monthly sales figures by device.

If the data is accurate (big if), Dediu says RIM's BlackBerry and Palm's webOS fell considerably and Android manufacturers hit a wall in August following the wide spread availability of iPhone 4.

I wrote this up as a lack of competitiveness. It may seem provocative, but I define competitiveness narrowly: the competition is for a purchase decision on equal terms. These purchase decisions are fiendishly complex to predict, but the data speaks: whether it’s due to brand, visibility or performance and in spite of “antennagate” the iPhone is cleaning up.

While Android didn't rescue Verizon, it did put them in bed with Google, a capricious evil compared to Apple's more predictable evil, currently in service of AT&T. That's why the same August period might also explain the uptick in iPhone on Verizon rumors. What of BlackBerry, Android, et. al when (if) Verizon turns to iPhone?

BlackBerry and Droid have been reliant on Verizon's promotion, not as much RIM or Motorola/HTC generated marketing. If those marketing dollars shift to iPhone and if Verizon's customers shift to iPhone, what does that do for the competitive market?

my conclusion remains that iPhone will find at least 8 million new users with Verizon. The analysis above give me confidence to increase the upper bound to possibly 12 million.

[aymco via @Lessien]

Rene Ritchie

Editor-in-Chief of iMore, co-host of Iterate, Debug, Review, The TV Show, Vector, ZEN & TECH, and MacBreak Weekly podcasts. Cook, grappler, photon wrangler. Follow him on Twitter and Google+.

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There are 21 comments. Add yours.

Jason says:

Its no secret anymore "Big Red" will get an iPhone. What does everyone think the iPad was about....just a foot in the door with Apple. I do however think we are all a little early to think it will be early 2011. Apple and Verizon will release the first iPhone as a true first 4G iPhone and not before that.

webvex says:

Et is not an abbreviation; the period shouldn't be there. As for Verizon, they'll also have to take into account how much the iPhone would cannibalize their existing products, and they probably make better margins on those other products than they will with the iPhone. Adding the iPhone is not a pure addition on top of what what they have now. I think it would be a boost, but there are a lot of related costs as well.

mullrat says:

Nice one Rene. I am a bit surprised that they think they'll only sell 8 million iphones though. they tend to underestimate this stuff. There are plenty of articles that have claimed that up to 17% of verizon subscribers would get an iphone. Verizon has 95million subscribers. Thats closer to 16 million potential users. Personally I think they are working on it and will announce the iphone in march when they talk about iOS5. To me they need to a brand new OS to deal with CDMA basebands. So people who think that the iPhone will be released on Verizon in January are being a bit premature.

KGR says:

Are you f-ing kidding me? Verizon WANTS the iPhone, maybe; they DON'T need it! I'm all for brand loyalty and all that jazz, but thinking Steve Jobs is God Almighty and featuring a clearly biased report on Android being 'capricious' and iPhone 'decimating' Verizon's growth is a little much.

JNGold says:

@KGR,
Get off the Steve Jobs hate list. This has nothing to do with him but rather what's happening in the market. Steve doesn't hold a gun to anyone's head and forces them to purchase an Apple product, let alone an iPhone.
According to the article:
“In an apples-to-apples comparison, in Q3 the iPhone at AT&T outsold Android at Verizon (remember, same addressable market) by a factor of 2.5. This is with a variety of devices and vendors thrown in the market. We hardly ever get to see this finely grained a comparison when looking at platforms.”
That says it all.

Limegrntaln says:

KGR.... lol it's an article. He's not f'ing kidding you. The iPhone stumps all. I browsed with Andriod this weekend. After having an iPhone 4 the experience doesn't compare.

Trevor says:

@Rene - just to be clear, the blue line in the graph represents where sales will go IF they get the iPhone? And that dot represents how many sales the AT-AT has of just the iPhone, or overall?
I know these are predictions for 2011, are they doing quarters like  does or are they normal? ie, the start of the graph is January 2011 and it runs until the middle of 2011. Thanks

Gcombs says:

@Jason I agree. Im thinking they're going to announce the Iphone for Verizon early 2011 and release it in June/July. Apple wants to have a massive Iphone launch with Verizon and AT&T and what better way to do it with the 2 largest carriers.

Gcombs says:

My previous prediction was Apple and Verizon will announce and launch the current Iphone 4 in early 2011. Apple will also announce the next Iphone which will launch on AT&T in June/July and Verizon will get that version 6 months later being a 4G LTE model but whatever the plan is Verizon will have the Iphone in their lineup.

Sadie says:

Plus there's the simple fact that scores of current iPhone users are going to flock to Verizon once it acquires the iPhone. The only reason I'm with AT&T right now is the iPhone; the instant Verizon gets it I will make plans to switch. There's no question in my mind that Verizon is a vastly superior network than AT&T, and I think that most current iPhone users would not disagree.

Steve Woz says:

They don't need the iPhone. They need a Flagship Android device that is running stock Gingerbread. They need a new version of what the Droid 1 was. Until they get it, their Android sales will be sub par. Right now even T-Mobile is selling Android at a competitive rate with the G2, Vibrant, and Optimus. Nexus S with an 8MP Camera and SD Expansion that comes unlocked would do the trick.

Ken says:

@ Sadie I will disagree, and there's also polls that state 80% of AT&T iPhone users are happy with AT&T so.....

EagleyeSmith says:

I don't really care if Verizon get's the iPhone. But I do agree that if it did go to Verizon, all that Android Love would be cut in half. The key in all this that most people overlook is consumer demand. That's the only thing that matters in the end. And consumers continue to show that they love the iPhone and what Apple brings to the table.

MennoMobile says:

Another thing you have to consider is that q3 was the iphone 4 launch. Yes, Verizon launched the Droidx and fascinate in the same time, but their BIG push was last November with the original droid. Since then they've been launching new phones every few months. This has a HUGE impact on spike sales. It's unlike the iphone where a new model only comes out once a year.
According to ATT's numbers 75% of their iphone sales were to existing customers (I'm guessing a good chunk existing iphone customers). Yes, that means 25% of sales were to new customers. (which is a higher amount than the net gain of customers). It could be argued that losing iphone exclusivity will destroy ATT more than it will help others, but that's another issue.
Verizon released some numbers a few months ago showing the insane growth of the smartphone market. Yes, this was largely due to android, but it's important to note that their smartphone user % increased significantly, so comparing the raw numbers to eachother isn't the best way to look at it here. We also have no idea how profitable an average Droid customer is to an iphone customer.
Also, I don't think Verizon is going to drop Droid advertising when they get the iphone. They've invested too much into making the brand to just drop it. Contrary to what a lot of sites are saying, they don't consider android the "second best" to push until they get the iphone. They'll sell the iphone because it will make them a ton of money, but they're not desperate for it.

marktaylor#AC says:

Whenever they launch on Verizon, it will take most of 2 years to see what the real impact is. Most normal people (as opposed to us that frequent tech blogs) will not pony up the cash to get out of a contract just to get an iPhone on Verizon or pay unsubsidized prices to switch from their current phone to an iPhone.

TreSupreme says:

"iPhone has decimated Verizon’s growth, Google is uncertain ally, and Android is simply not competitive with iPhone to the degree Verizon may have had to give in to Apple’s demands in order to launch a Verizon iPhone is 2011."
Im officially convinced that you are a loon Rene

Bid D says:

"Dediu says RIM’s BlackBerry and Palm’s webOS fell considerably and Android manufacturers hit a wall in August"
Deidu may be completly incorrect in his Data if he is grouping Android and Windows together. This would completly skew the numbers for android as Windows has nearly fell out of existence.
Personally I could care which OS reigns supreme - but I do wish that WebOS would comeback on some better hardware. WebOS is FREAKIN' awesome. Unfortunately I am now an Android Owner.
Android from my experiences is a better platform than iOS. Of course this is my opinion because of what I like for my phone to do for me.

KGR says:

@JNGold - PLEASE re-read my comment. Nowhere did I outright say I hate Steve Jobs. Facts don't lie, I understand that.

KGR says:

@Lime to each their own...I just don't want to lose signal ALL the time on the Death Star, AT&T.

Shrike says:

@Trevor
You're not reading the plot right or RTFA. The plot is of estimated Jan 2010 to Sep 2010 Verizon smartphone sales. Actually, ITG estimated sales up to October, on a monthly basis.
The ATT iPhone line is the quarterly sales as reported by ATT in 2010. The 4th quarter, Oct to Dec obviously has not been reported yet.
If the ITG estimate us true, it says several interesting things:

  1. Verizon caved during Apple-Verizon negotiations for the iPhone. This means Apple gets its 400$ subsidy, Verizon doesn't get any branding on the phone nor any control on the software stack or App Store, and Apple will get ATT like favorable network service deals.
  2. It took 6 months of nearly giving away Palm Pre and Pixi devices with contract for Verizon to get rid of its Palm device inventory. Jan, Feb, Mar 2010 Palm device sales were basically zero and finally took off when Verizon started to really incentivize Palm device sales.
  3. Motorola and Verizon's Droid BOGO really moved the units in the Jan quarter. And basically having having Verizon all to itself outside of the Eris really helped too. However, Motorola unit sales then fell off in the Apr quarter, and Droid X & 2 barely improved Moto's sell rate in the Jul quarter. Samsung and LG essentially dampened Moto's performance on Verizon.
  4. HTC got a small bump with the Incredible, but they are basically sustaining sales on Verizon.
  5. LG makes Android phones?? Must be my disdain of LG refrigerators, washers and dryers making me ignore their smartphones.
  6. The Android flood in July and August with the Droid X, Droid 2, Galaxy S, and LG whatever produced a nice peak in sales in August. The alarm bells start ringing when you see sales slipping in Sep and Oct. This is highly alarming as it may represent the lifecycle of an Android phone is 1 or 2 months and Verizon has to come up with new Android phones every other month. The other theory for the decline from the August peak is that Apple conquered Antennagate and the iPhone 4 took more of the smartphone customers in the Jul quarter.
  7. All of Android's growth is in the ROTW, not the USA.
  8. The ROTW is saving RIMM's butt. But, I have to imagine their ASP will continue to erode and their profits will erode eventually too.
  9. ATT is catching up to Verizon's subscriber numbers and they are doing it with smartphones, large on the shoulders of the iPhone. After the Verizon-Alltel merger, Verizon had something like an 8m subscriber lead Omer ATT. By the end of the Jul quarter, Verizon's lead was less than 1m. If the Oct estimate from IDG is true, ATT may surpass Verizon in subscriber base in the Oct quarter.
munch says:

Consider it from the carriers perspective. To them its all about subscriber growth. Verizon became #1 in subscribers when they purchased alltel. At&t is growing faster than verizon, and will eventually pass then to become number 1 again. The graph shows that iPhone is a large reason for at&t's faster growth. So the playing field will become more level if vZ gets the iPhone. At&t's growth will not come at the expense of Verizon. Thats why they want it.