Great Expectations from the iPhone
Rajesh is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The top U.S. wireless carrier, Verizon (NYSE: VZ), believes that it has an edge over other fellow players in offering the iPhone 5 that supports LTE technology. The company, which has an extensive network footprint covering over 75 percent of the nation’s population, is preparing to sell Apple’s trendsetting iPhone 5 on its 4G LTE network starting September 21. Customers would be able to pre-order the iPhone online on September 14. The 16 GB model would come for $199.99, 32 GB version for $299.99 and 64 GB model for $399.99 with a two-year contract with the carrier.
AT&T (NYSE: T) has sold more units of the smartphone and has been the primary and most active partner when it comes to selling the iPhone. Verizon and Sprint (NYSE: S) couldn’t keep pace with the carrier. However it would be interesting to check out how things could take a turn for the carriers given Verizon’s lead in deploying the next gen 4G LTE. The introduction of 4G LTE has made it essential for buyers to consider and compare each carrier before buying the iPhone. Which carrier is the best to grab the iPhone 5 from? Will it work in favor of the Big Red? Let’s check out.
Big Red senses big opportunity
Apple launched the most awaited device this fall the iPhone 5 on Wednesday, declaring that the smartphone would be made available to the customers through Verizon, AT&T, and Sprint. Among all the wireless providers, Verizon’s position looks pretty strong.
We know that the new iPhone supports the 4G LTE technology that carriers are adopting to build out a high speed network. Both Verizon and AT&T claim it to be 10 times faster than 3G. The three national carriers offering the iPhone have the LTE, but Verizon LTE network has the most extensive coverage with highest network quality, thanks to its early jump. The top carrier covers about 235 million POPs and expects to touch the 260 million mark by year end. On the other hand, AT&T has a much lesser coverage of 74 million people though it is in the process of rapidly building the next gen network. The third carrier Sprint barely started deploying the LTE which is currently present in a handful of market while the telecom provider promises to meet an ambitious target of 123 million POPs by end of this year.
Another point that makes Verizon more attractive is that it would offer free FaceTime over cellular on all data packages without an additional fee. Unlike AT&T, Verizon customers won’t have to stick to shared data plan to avail free FaceTime service. Like Verizon, even Sprint wouldn’t charge for FaceTime calls nor require customers to switch plans to enjoy such features.
Great Expectations
Verizon has great expectations from the iPhone sales. Though the third quarter wouldn’t see such a jump given the short selling period, the carrier expects the iPhone demand to be very strong. The fourth quarter should be a rocking one for the carrier driven primarily by the iPhone 5 sales followed by other gadgets that are in the pipeline. The question for Verizon would be what profit margin the company would enjoy with fans flocking in to enjoy the 4G speed. On one side it would lose out on the subsidy cost that it will have to bear for the premium priced masterpiece. On the other side the carrier would rake in bulk of its revenue from heavy data usage by the iPhone users which would make up for the huge subsidy cost.
Final thoughts
Verizon is all set to benefit from Apple’s latest masterpiece. The company’s LTE coverage will give it a big edge over other carriers who still lag behind. Its 4G network would draw more iPhone buyers towards it. In addition, the carrier wouldn’t have to suffer from squeezed margins owing to the subsidies as Apple fans, as always, would love to explore more of the device and so subscribe to larger data plans, thus pouring more money into the carriers pocket.
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