The arrival of an iPhone for Verizon may be a hidden blessing for AT&T in the short term, according to research firm Nomura.
Dallas, Texas-based AT&T should continue to see healthy revenue and profits in the short term, despite losing its exclusivity agreement on the iPhone, according to analysts. The wireless giant, which has been the sole U.S. carrier of iPhone since its arrival on the market, is set to lose exclusivity when Apple’s popular handset begins selling at rival Verizon early next year.
While Nomura anticipates AT&T to lose significant iPhone subscriptions next year, it believes the telecom giant could be paying less subsidies to Apple, which had significantly cut into its profit margins in the past. AT&T would also still retain a higher data use per customer rate on its current iPhone users, which should keep revenue flowing in, and may also generate revenue from early termination fees.
“Although we expect losses of at least 2.2 million subscribers to the Verizon iPhone, AT&T could have a net positive impact on earnings due to the early termination fee revenue,” said Mike McCormack, analyst at Nomura.
In contrast, Nomura analysts said Verizon’s earnings may be affected by heavy subsidy fees paid to Apple, depending on the nature of its contract with the company.
However, Nomura also warns that a price battle between AT&T and Verizon has not been taken into account of its forecast, which could find the companies boosting the subsidies they pay for the phones in order to lower prices to entice customers.
While AT&T is anticipated not to be adversely affected in the short-term by the loss of its iPhone exclusivity, there is no doubt that the device’s arrival at rival Verizon will be a game-changer for both companies.