Apple poised to break with AT&T, as iPhone boosts record quarter

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Apple poised to break with AT&T, as iPhone boosts record quarter

By CAROLINE GABRIEL

Published: 26 January, 2010

READ MORE: Financial | Apple | AT&T | iPhone

Apple set a glittery scene for tomorrow's supposed 'iSlate' launch, reporting its most profitable quarter ever, as it reaped the rewards of breaking the iPhone's exclusives. With AT&T the only major exclusive carrier left for the device, there is rising expectation that it will lose that position tomorrow, with the release of an iPhone variant for Verizon Wireless.

As well as the expected tablet - expected to be a 10-inch, content-driven device combining features of an e-reader, video player and smartbook - Apple may announce a new iPhone. Not a complete fourth generation refresh, likely to debut in April or the traditional Apple launch date of June, but a variation for Verizon's CDMA network, which could also carry the tablet.

If the 'iSlate' is to feature embedded wireless, like the Amazon Kindle, it would need to come in CDMA and GSM versions to support a Verizon deal as well as international sales (Kindle switched from CDMA-based Sprint to GSM-based AT&T when it went international). Or the Apple product could feature a multimode processor like Qualcomm's Gobi, which was reportedly evaluated by Amazon but considered too expensive (with a rumored price tag over $1,000, the same might not apply to iSlate).

The loss of the exclusive would hit AT&T hard. Despite the iPhone's drain on its margins and on the performance of its painfully stretched 3G network, the Apple device has been responsible for nearly all its customer adds during the course of the deal. Recently, the cellco announced partnerships with a range of new platforms - including Nokia Ovi, Brew, Palm and Android - in apparent anticipation of the loss of its golden goose.

Apple COO Tim Cook evaded the question of the AT&T exclusive on the analyst call following the results announcement, just issuing the predictable statements about what a great partner AT&T had been. "It's important to remember they had more mobile broadband usage than any other carrier in the world," he said. "As you know, AT&T has acknowledged they have some issues in some cities, and they have detailed plans to address these. We've reviewed these plans, and have confidence they'll make significant progress."

In its first quarter, ended December 31, Apple sold more than 8.7m iPhones, doubling the year-ago total. This vindicated the policy, introduced in stages over the past 18 months, of ending exclusives where they existed, and entering new markets on a non-exclusive basis. Despite the fame of Apple's model of negotiating long and vendor-friendly operator deals, in fact the iPhone has launched with more than one carrier in most countries. Now those that did have one carrier, such as France and the UK, have gone multi-carrier, and the change of heart has been fully justified - making it even more likely that Apple will make the same move in the US soon. Broader distribution has increased sales and market share, while the profit dent incurred by higher competition between iPhone carriers has mainly been taken by the cellco rather than Apple. Overall, the vendor's net profit rose by 50% to $3.38bn, its highest ever, on revenues of up 31% to $15.68bn.

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