JANUARY 8, 2011 Verizon Finally Lands the iPhone


The iPhone is finally coming to Verizon Wireless. The largest U.S. wireless carrier will make the long-awaited announcement at an event Tuesday in New York City, a person familiar with the matter said Friday. The move will for the first time let U.S. consumers choose the network that carries their iPhone and perhaps give them additional pricing options that could affect their monthly bills.
It will also upend the balance of power in the industry, ending Verizon rival AT&T Inc.'s exclusive hold on the device and leaving smaller players like Sprint Nextel Corp. and T-Mobile USA facing two well-capitalized competitors offering the world's most popular smartphone.
It wasn't immediately clear when Verizon would have the device in stores.
The Verizon phone will be similar to the iPhone 4 but run on the carrier's CDMA technology, people familiar with the matter have said.
Verizon Wireless is a joint venture between Verizon Communications Inc. and Vodafone Group Plc.
Apple is moving to expand its carrier base in the U.S. at a time when it is facing increasing pressure from phones powered by rival Google Inc.'s operating system, called Android.
Google gives its software away, hoping to stake out space on mobile phones where it can sell ads and other services.
Android-based phones passed the iPhone in sales in the second quarter, according to research firm Gartner. The surge appeared to get to Apple Chief Executive Steve Jobs, who made a rare appearance on a conference call with analysts in October and criticized Android as fragmented, referring to the myriad ways the software appears on the many different phones that use it.
AT&T has had the iconic device to itself since its introduction in June 2007.
Since then, the iPhone has fueled much of the carrier's subscriber growth and has given it a solid lead in smartphone customers.
The arrangement between Apple and AT&T was groundbreaking at a time when carriers tightly controlled the appearance and function of their phones, and put Silicon Valley companies like Apple and Google in the wireless industry's driver's seat.
Apple feels it has had tremendous success through its exclusive relationship with AT&T, but it recognized that it needs to partner with Verizon to grow sales faster in the U.S., a person familiar with the matter said.
"It's a big boost for Apple," said Tim Ghriskey, chief investment officer of New York-based Solaris Asset Managmenet which counts Apple in its portfolio worth $2 billion. "It opens up a huge uninstalled base for them in this country."
Verizon Wireless fought its way back into the smartphone race last year by heavily promoting Google-powered phones made by companies like Motorola Mobility Holdings Inc. and HTC Corp.
Top Verizon executives have continued to meet regularly with their counterparts at Apple, however, and have long expressed interest in carrying the iPhone, which could help add to the carrier's base of 93 million subscribers. Toni Sacconaghi, an analyst at Sanford Bernstein, has estimated that Verizon could add more than 10 million U.S. iPhone customers.
"It's great news," said Michael Benkoski, 55 years old, who works at a technology leasing company in Chicago. "I've been waiting for it for about two years."
IPhone users have long complained about dropped calls and poor service on AT&T's network, even as the carrier boosted spending to improve coverage. A Consumer Reports survey last month ranked Verizon's network as most reliable among the major carriers and AT&T's as the worst.
Analysts fear AT&T could see one to three million fewer new subscribers because of the Verizon iPhone. AT&T has been preparing for a loss of exclusivity, however.
This summer, it made it easier for customers to upgrade to the new iPhone 4, in the process locking them into new two-year service contracts. The carrier says many are also on family or business plans, making it tricky to switch.
Colby Synesael, an analyst with investment bank Cowen and Co., said that "the loss of the iPhone is more of a headline risk than a financial impact."
Smaller carriers like No. 3 Sprint and No. 4 T-Mobile could be harder hit, however.
"This is the worst case scenario for the other carriers," said Roger Entner of Recon Analytics. "When Verizon comes out with the iPhone, there's only one carrier in the U.S. that will gain customers, and that's Verizon."
While Verizon's network is popularly perceived to be better than AT&T's, it has yet to be tested by the heavy volume of data use that accompanies the iPhone. The carrier has been strengthening and testing its network for months to avoid the public relations nightmare AT&T has suffered from, one person familiar has said. Verizon executives also point to their success handling laptop traffic and the data demands of a growing base of Android phones.
Analysts will be eager to know when other U.S. carriers might also get to carry the iPhone. They aree also waiting to see whether Apple will offer the CDMA iPhone to other CDMA operators around the world in countries such as in India and China.
Verizon sent out invitations for an event to be held in New York City on Tuesday asking that recipients "Join us as we share the latest news," but didn't specify the subject matter. The event will be headlined by Lowell McAdam, president and chief operating officer of Verizon Communications.
The event threatens to overshadow Verizon's keynote address Thursday at the Consumer Electronics show in Las Vegas, where the carrier touted its new 4G network and announced a number of Google-powered phones and tablet PCs designed to make use of the network's capabilities.
Write to Shayndi Raice at Shayndi.Raice@wsj.com and Yukari Iwatani Kane at yukari.iwatani@wsj.com
It took long enough. If you ask me things are about to get real interesting between AT&T and Verizon.