Apple’s unveiling of the iPhone 5 seemed to check the boxes on many features the media and consumers were clamoring for and what “leaks” seemed to be indicating for the past several weeks. However, the one mystery surrounding the device that had to wait for official Apple approval was related to which carriers would actually be offering the device when it goes on sale on Sept. 21.
Obviously, the big domestic winners from the announcement were Verizon Wireless, AT&T Mobility and Sprint Nextel, the three carriers announced initially as offering the new iPhone 5. The inclusion of those operators was not much of a surprise as all three have been carrying the iPhone line since the 4S was launched late last year.
However, the competitive environment between those three operators is expected to change with the iPhone 5 due to the inclusion of LTE support. Consumers may still be exactly unaware of the benefits provided by LTE, but the marketing deluge that has drenched the market over the past year surrounding the technology ensures that they know they need LTE. And here is where the marketing efforts are sure to increase.
Many analysts have noted that Verizon Wireless current leadership in LTE coverage will provide the carrier with at least a near-term advantage when it comes to taking advantage of the marketing pull inherent in the iPhone 5’s LTE capabilities. You can bet the carrier will continue hacking away at that coverage advantage through all of its marketing channels.
However, Verizon Wireless has also had more of an arms-length relationship with the iPhone than most of its rivals. Analysts have noted that the high cost of device subsidies has rankled the carrier for some time and that it continues to put greater marketing efforts around less subsidized smartphones running Google’s Android operating system as well as shown support for Nokia’s Microsoft OS-powered plans.
Verizon Wireless just last week was core to the unveiling of new Droid Razr models from Motorola, which have been break-out hits for the carrier’s non-iPhone offerings. During its second quarter conference call in late July, Verizon Wireless also seemed to go out of its way to show that its growth is not a one-trick (iPhone) pony, reporting that it sold 2.9 million smartphones running the Android operating system during the quarter, compared with 2.7 million iPhones. Verizon Wireless did note that 25% of iPhone sales, or roughly 675,000 devices, were sold to new customers to the carrier, which was a slightly ahead of the 500,000 LTE-equipped smartphones that were sold to new customers, signaling that the iPhone is still a significant draw for new customers.
For AT&T Mobility, the LTE angle could be a short-term challenge as while it’s furiously trying to match Verizon Wireless’ coverage footprint, the carrier has a long way to go before it can claim parity. One benefit to its somewhat newer LTE offering is that the network is supporting fewer customers that will allow AT&T Mobility to show off speed testing that is sure to prove superior to Verizon Wireless in some markets.
AT&T Mobility will have to be careful in touting a superior network as past experience as the lone domestic outlet for the iPhone prior to Verizon Wireless picking up the device in early 2011 was not known for its strong network message.
However, AT&T Mobility’s history in offering the iPhone could prove beneficial as consumers have become comfortable with the carrier’s foibles through the years and many are still contractually obligated to remain with the carrier. That has shown in recent quarterly results where AT&T Mobility has continued to sell more iPhones than its rivals, including 3.7 million sold during the second quarter of this year.
Sprint Nextel is sure to have the greatest challenge in touting the benefits of the iPhone’s LTE capabilities. The carrier only just began offering commercial LTE services and though it’s promising a rapid expansion of its coverage into next year, the carrier will initially be limited it what it can offer to consumers. Further impacting the carrier’s network target will be its reliance of only 10 megahertz of total spectrum in the 1.9 GHz band that is both a smaller slice of airwaves than its larger rivals, but also higher up the frequency chart that impacts both network propagation and in-building coverage.
Because of its at least short-term network handicap, you can bet Sprint Nextel will focus most of its marketing efforts on its continued offering of flat-rate, unlimited data services for its smartphone users as compared to the tiered offerings from its rivals. Sprint Nextel hinted at an investor conference this week that it will continue offering unlimited data through the initial launch of the iPhone 5.
Though not included in the Apple presentation, Leap Wireless announced that it would also begin offering a version of the iPhone 5 beginning Sept. 28. The carrier, which earlier this year began offering a no-contract, lightly subsidized version of the iPhone through a three-year, $900 million agreement with Apple, has not yet announced pricing details for the latest iPhone.
The one carrier seemingly most hurt by the announcement was T-Mobile USA, which has been suffering significant postpaid customer defections over the past several quarters tied to its inability to officially offer any variant of the iconic device. Most of this has been due to T-Mobile USA’s unique spectrum and technology position, which has it currently running its high-speed HSPA+ network across its 1.7/2.1 GHz spectrum band, which differs from the 850/1900 MHz being used by larger rival and long-time iPhone provider AT&T Mobility for its HSPA+ offering.
T-Mobile USA earlier this week sort of hinted at the initial inability to offer the latest iPhone by announcing a program to aggressively target current AT&T Mobility customers with iPhone’s to have those devices unlocked and configured to work across the T-Mobile USA network. Those plans include having retail outlets showing off unlocked iPhone models running across the carrier’s network. That offering is also bolstered by T-Mobile USA’s recent re-introduction of flat-rate, unlimited data services for its smartphone users.
T-Mobile USA has taken a more passive approach to supporting unlocked iPhone’s in the past, at one point noting it was serving hundreds of thousands of unlocked iPhones on its network.
A light at the end of tunnel for T-Mobile USA may come next year as the carrier is in the process of re-configuring its network to run LTE services across its 1.7/2.1 GHz spectrum, which would be similar to plans from both Verizon Wireless and AT&T Mobility, and its HSPA+ service across its 1.9 GHz spectrum holdings.
Other domestic carriers initially left out in the cold include a handful of rural and prepaid operators that were not named by Apple in the initial batch of operators to offer the iPhone 5. Many of these operators began offering the current generation of the device months after it was launched into the market, which might be the model that follows with the iPhone 5, but until that happens, those operators will be forced to compete in the marketplace with yesterday’s technology.
This topic is also sure to be on top of minds at the upcoming Competition Carrier Association trade show scheduled for just days after the iPhone 5 launches. The trade association, which recently re-branded from its previous Rural Cellular Association roots, has made it a point to lobby the government on the need for broader device availability for smaller carriers that are often locked out from offering the latest smartphones.
Internationally, Apple announced that the iPhone 5 would initially launch across a handful of countries, and with operators that have rolled out LTE services. Those operators and countries include Bell, Telus, Fido, Virgin and Kudo in Canada (the major name missing being Rogers); Softbank, Smartphone, Singtel and SK Telecom in Asia (no mention of Japan’s NTT DoCoMo nor any operator in China); Telstra, Optus and Virgin Mobile in Australia; and Deutsche Telekom and Everything Everywhere in Europe (no mention of any of Vodafone’s affiliates across the region).
A second group of carriers across 22 more countries are expected to begin offering the device beginning Sept. 28. Those countries include Austria, Belgium, Czech Republic, Denmark, Estonia, Finland, Hungary, Ireland, Italy, Liechtenstein, Lithuania, Luxembourg, Netherlands, New Zealand, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Sweden and Switzerland.
Regardless of sales, most operators have noted that they expect margins to take a hit through the end of the year as they absorb the millions of customers that do decide to pick up a fully subsidized iPhone 5. Among domestic carriers, analysts have hinted that some operators could see as much as a 15% drop in wireless margins connected to the continued consumer infatuation with smartphones, an emotion that is only to increase once the latest iPhone hits the streets.
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