WASHINGTON, February 14, 2011 - Initial reports from market analysts show mixed reactions to the Verizon iPhone launch last week and its possible effects on AT&T’s share in the wireless marketplace.
After more than four years of an exclusive deal with AT&T, Apple's popular iPhone handset became available to Verizon customers earlier this month and sold out within a day. Last week the handset went on sale to the general public, but the long lines that have come to be associated with new Apple releases failed to materialize at Apple and Verizon stores across the country - except in places where AT&T does not have service and Verizon did. Parts of the Dakotas, Montana, Wyoming, and Nebraska welcomed the iPhone for the first time.
In regions of the country where the phone was previously available, it appears that most customers are new to the iPhone as well. Market research firm Changewave conducted a survey in which 26 percent of customers said they would change from AT&T to Verizon. ChangeWave said survey respondents most common complaint about AT&T’s network were spotty reception and dropped calls .
ChangeWave also estimated that AT&T’s churn rate - the number of subscribers who say they are planning to change carriers in the next 90 days - is at an all-time high of 15 percent. That projection is far off from AT&T’s own quarterly report for the end of last year, which put it’s own churn at about 1 percent.
According to investment firm Piper Jaffray analyst Gene Munster, current AT&T customers are less excited about the iPhone. He projects that the new iPhone will sell well in general, concluding that “demand for the Verizon iPhone is strong, and we remain comfortable with our estimate of 1.5 million Verizon iPhones in the March 2011 quarter.”
The study, however, showed that 8 percent of new customers were accounts switching from AT&T to Verizon. James Ratcliffe, a Barclays analyst, agrees the the “[Verizon] iPhone launch, while material to both Verizon and AT&T, is not likely to radically reshape the industry landscape."
Analyst Daniel Ernst from Hudson Square Research agreed that the majority of new iPhone customers with Verizon are not people who switched from AT&T, but current Verizon customers who were waiting for the iPhones debut. Ernst found only 6 percent of respondents confirmed that they had switched carriers from AT&T to Verizon for the iPhone. His study found that 70 percent of the respondents were current Verizon’s customers who were switching from their current handset to the iPhone.
That high percentage of existing Verizon customers who bought an iPhone is reinforced by data in Verizon’s own quarterly report, which showed an unusual number of customers waiting to upgrade their phone at the end of 2010 as Verizon confirmed longstanding rumors that it would begin carrying the handset in early 2011.
The exodus from AT&T to Verizon may be difficult to measure this soon after the Verizon launch, as AT&T customers wait for their current contracts to expire. Those who elect to terminate their contracts early may face an early contract termination fee of up to $325.
Though AT&T has not publicly voiced concerns about subscribers fleeing the carrier, it has begun allowing its current iPhone customers to return to an unpublished, unlimited data plan as well as thanking loyal customers with free call time that they may keep from month to month.
The true test of carrier loyalty among AT&T customers may come later this year, however, as customers look forward to the rumored launch of a next-generation, 4G iPhone sometime this summer. Some technology analysts suggest that only when both carriers have rolled out faster data networks and have begun selling a new Apple iPhone will the industry have a clearer picture of which carrier will gain the upper hand.