AT&T Will Soar Alongside Apple’s iPhone 5

Muhammad is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Apple’s (NASDAQ: AAPL) iPhone 5 is already sending ripples through the market. Despite earlier concerns from industry analysts over its ability to pierce the very-crowded smartphone sector, the next generation iPhone has managed to get the full attention of consumers. In-house reports from Apple reveal that customers placed more than 2 million pre-orders on the iPhone 5’s first day, choking initial supply and exceeding analyst expectations. Alternate reports also indicate that the number of iPhone 5 online sales made in 3 days was equal to the number of iPhone 4S sales transacted in 3 months.

With all this in mind, where do U.S. carriers stand? Although there are many varied possibilities, I am inclined to believe that AT&T (NYSE: T) will greatly benefit.

Fastest selling smartphone it has ever offered

Being the original carrier to the iPhone, AT&T has managed to maintain a definitive record of the iPhone sales that it has made over the years. Since the debut of the first iPhone, AT&T notes that the iPhone 5 was by far the most successful iPhone launch ever.

It is an unwritten fact that most iPhone enthusiasts prefer AT&T. This was clearly demonstrated after data compiled by Comscore revealed that the telecom giant accounted for 68% of all the U.S. iPhone 5 online sales made within the first three days. This figure eclipses Verizon’s (NYSE: VZ) 24%t and Sprint Nextel’s (NYSE: S) tiny 8%.

With this kind of loyalty, I am confident that AT &T will manage to make more sales in subsequent periods. Likewise, AT&T’s direct link to the iPhone places it on the watch list of many tech specialists. I believe that this draws the spotlight to AT&T and inevitably generates a buzz about the stock.

Appealing to the needs of the market

Unlike some of its competitors, AT&T manages to appeal to the market’s prioritized needs. This can be clearly seen when comparing it with a competitor like Sprint. Sprint is deemed to be a formidable competitor despite its trailing market share compared with AT &T.

The graph below shows how AT&T’s subscriber base is miles ahead of Sprint.

<img src="/media/images/user_13010/s_large.jpg" />

Source: Strategy Analytics

Sprint, which comes in third, is far behind AT&T and Verizon. The latter two actually operate in a league of their own.

That aside, Sprint’s turnaround story has been a success so far, and CEO Dan Hesse projects profitability in 2014. I believe, however, that Sprint’s slant toward unlimited data plans is a huge mistake. To the naked eye, the plan may appear to be the best value for money; however a more detailed look reveals that it doesn’t appeal to the direct needs of the market.

By subscribing to Sprint’s data plan, you unsuspectingly agree to pay less while getting less. Why should you have unlimited data on a notably slow network? When compared with AT&T and Verizon, Sprint forms the tail in terms of speed.

Speed is one of the most prioritized needs in the market right now. I strongly believe that most consumers are willing to dip a little deeper into their pockets in favor of faster phones. Nobody fancies lengthy downloads anymore.

AT&T has 4G coverage for close to 275 million people. In light of this huge coverage, I am inclined to believe that AT&T is more likely to appeal to speed enthusiasts (who happen to be the majority of consumers). Another plus for AT&T is that most iPhone 5 buyers were lured in by the 4G capability. Any rational user would therefore want to experience the capabilities of the phone full on. This perhaps explains why AT&T managed to make more sales within the first days when compared with Sprint.

Sprint vice president Kevin Kunkel doesn’t see an end to unlimited data plans in the foreseeable future. While the unlimited package may appeal to consumers who want to save, it is not sustainable. Unlike AT &T’s plan, the unlimited package generates revenue much slower.

Sprint needs to make as much money as it can at such times. Its model widens the evident financial rift between itself and competitors like Verizon and AT&T. This may bury its hopes of restoring profitability in 2014.

In conclusion, I believe that AT&T is a winner right now – at least until the iPhone 5’s hype fizzles out.

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muhammadbazil has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple. Motley Fool newsletter services recommend Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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