Verizon needs Apple's iPhone badly, analyst says

Data shows iPhone outselling all Verizon smartphones in Q3

Verizon Wireless smartphone retail sales data show that Verizon needs the Apple iPhone badly, according to a research note entitled Verizon Strikes Out in Smartphones by a financial analyst at Asymco.

The data shows that the iPhone alone, sold exclusively by AT&T in the U.S., sold at nearly twice the rate of all of Verizon's smartphone sales in the third quarter of 2010, said Asymco analyst Horace Dediu. He was reacting to data released last week by ITG Investment Research that relies on daily point-of-sales records from thousands of wireless U.S. retailers.

"Verizon has three strikes against them," Dediu said, ticking them off. The iPhone, he said, has "stolen" Verizon's smartphone growth; Verizon faces the prospect of Apple's iOS as the single dominant player; and Android is "not competitive versus iOS."

Verizon is expected to begin selling the iPhone in early 2011 according to several analysts. Brian Marshall at Gleacher & Co. pegged March as the month for a Verizon iPhone launch .

ITG investment analyst Matthew Goodman first revealed the sales results in an All Things Digital report last week that focused on Research in Motion's relatively weak showing at Verizon -- not how Verizon has done compared to iPhone sales at AT&T.

Dediu noted that Verizon had fewer than 3 million smartphone activations in the third quarter of the year, while iPhone exceeded 5 million. Most of the Verizon activations -- about 2 million -- involved Android and Windows Mobile smartphones; Dediu suggested that Windows Mobile sales were minimal.

Dediu said that Verizon's strong reliance on Android smartphone sales "is barely enough to keep the battle with AT&T from becoming a rout." He added: "The data speaks-- whether it's due to brand, visibility or performance and in spite of 'antennagate,' the iPhone is cleaning up."

The sales data also show that Verizon has reason to sell the iPhone and he predicted it will sell iPhones at about the same rate as AT&T, he said. He argued that since both carriers have about the same number of subscribers (93.2 million at Verizon and 92.8 million at AT&T) and iPhone sales have trumped smartphone sales at Verizon, the iPhone will do well at Verizon. He now expects Verizon to sell about 4 million iPhones a quarter.

Verizon has sold about 3 million smartphones a quarter for the first three quarters of 2010 based on three OSes, six manufacturers and widespread promotion, Dediu noted. "Since a mass-market product will appeal equally to statistically equivalent populations, the product should be taken-up with similar vigor."

A Verizon spokesman said the carrier had no comment on Dediu's commentary or the accuracy of ITG's retail sales data.

However, an AT&T spokesman said the Dediu report and a summary in 9to5Mac.com "underscores the strength of AT&T's approach, which is to offer our customers maximum choice in devices, operating systems and much more."

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Matt Hamblen

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