Verizon Enters the iPhone Market... And is Poised to Ravage AT&T's Market Share

by Alexander Moschina, Social Media Manager Market Trends Market Trends

Verizon Enters the iPhone Market... And is Poised to Ravage AT&T's Market Share

by Alexander Moschina, Investment U Research

Monday, January 31, 2011

Thanks to the iPhone, AT&T (NYSE: T) boasts a 25% share of the mobile phone market.

Unfortunately, though, the company isn't winning any popularity contests with its customers...

Consumer Reports ranks AT&T as the "worst wireless carrier," while the Christian Science Monitor recently reported that 34% of AT&T's iPhone users are holding off on upgrading their phones to avoid signing another two-year contract.

That's no surprise, given the persistent problems that have dogged AT&T since Apple (Nasdaq: AAPL) released its iPhone in 2007. Poor reception... dropped calls... account security troubles... and to top it all off, it seems like AT&T's network just can't handle so much data.

In short, maybe the iPhone is too popular a device for one mobile provider. Luckily, that's all about to change...

Verizon Threatens to Steal Six Million of AT&T's Customers

On January 11, Verizon (NYSE: VZ) announced that it will offer the iPhone, starting on February 10. The phone will be available for $200 with a two-year contract.

And unfortunately for AT&T, the deal could cripple its subscriber base. Close to 25% of all AT&T customers said they would drop the carrier if a Verizon iPhone were available.

How many exactly?

On average, analysts predict AT&T will lose around six million customers right out of the gate. And considering that 5.2 million customers activated iPhones in AT&T's third quarter, that's a hefty loss.

Whether those customers will stick around remains to be seen. On the bright side for AT&T, the Verizon iPhone won't have access to its 4G network. At least not this first generation phone. Down the road, however, both networks plan to offer 4G iPhones.

But the fact that Verizon plans to offer unlimited data plans, whereas AT&T offers only 200MB and 2GB plans, is just another negative for AT&T.

Clearly, the iPhone release bodes well for Verizon shares, with RW Baird analyst William Power predicting that Verizon will set 25 million this year. But it gets better...

Verizon Dominates with the Droid... is the iPhone Next?

At the moment, there's a war being waged for smartphone supremacy – Apple's iOS vs. the Android platform. So far, AT&T has profited from both sides. But that's about to change.

While Verizon wasn't the first mobile carrier to push the Android platform, it was the most aggressive. In late 2009, you couldn't turn on the television without seeing commercials for its "Droid" line of phones.

Since then, Android's market share has taken off like a rocket. In November, a full 80% of Verizon's smartphone sales were Android-based.

And Android smartphones recently achieved another big milestone, overtaking Apple's 25% market share. It now dominates, with a 32% stake.

According to A.M. Sacconaghi, an analyst at Sandford C. Bernstein & Company, taking the iPhone to Verizon may be Apple's only chance to reclaim its market share.

No matter how you look at it, though, this sector is going to heat up over the coming months. And AT&T losing its exclusive iPhone deal with Apple is a massive development.

If Verizon inherits even a quarter of AT&T's wireless business, the company could absolutely dominate the industry.

Good investing,

Alexander Moschina

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