AT&T May Lose 1 Million IPhone Customers to Verizon

AT&T Inc. may lose as many as 1 million iPhone customers next year as rival Verizon Wireless begins selling the Apple Inc. device, according to analysts’ estimates.

Between 500,000 and 1 million of AT&T’s estimated 18 million iPhone users may end their contracts early or decline to renew them in 2011 in favor of a Verizon Wireless contract, said Barclays Capital analyst James Ratcliffe. Pacific Crest Securities analyst Steve Clement forecast the losses at about 800,000 users.

“It’s also going to reduce AT&T’s ability to attract new subscribers once there’s an alternative out there,” said Clement, who is based in Portland, Oregon.

The estimates don’t include normal customer additions and losses, known as churn. AT&T is still likely to increase its overall number of wireless customers next year, the analysts said.

Verizon Wireless, based in Basking Ridge, New Jersey, will begin offering the iPhone on its network in January, ending the exclusivity AT&T has held since the device’s introduction in 2007, two people familiar with the plans said this week.

The number of AT&T customers Verizon Wireless attracts is limited because many have existing two-year contracts and would have to pay a fee to end them early, Chris Larsen, a Piper Jaffray & Co. analyst in New York, said in an interview. Apple said it sold 1.7 million iPhone 4s in five countries in the first three days, boosting AT&T’s base of users under contract.

Apple, based in Cupertino, California, has sold more than 50 million iPhones since it was first introduced in 2007.

AT&T’s Hold

“We are very confident about our position with exclusivity or without,” Mark Siegel, an AT&T spokesman, said in an interview. “We’re not dependent on a single smartphone to be competitive, we offer a lot of great devices.”

About 70 percent of AT&T’s customer base is in a Family Talk plan, which has a high rate of retention, Ralph de la Vega, the carrier’s head of wireless, said in May.

“For Verizon, it will largely be selling the iPhone to existing customers,’” said Oppenheimer & Co. analyst Timothy Horan in a research note today. Horan, who is based in New York, said AT&T is making network upgrades that should help it retain users.

Jeffrey Nelson, a Verizon Wireless spokesman, declined to comment.

AT&T’s Contracts

“What AT&T is trying to do is get customers to upgrade to the new iPhone and sign a new two-year contract and in the meantime they’ll work to improve their network,” said Piper Jaffray’s Larsen. “So you won’t want to opt out because of the termination fee and in two years hopefully you’re happy with your service and you don’t want to switch.”

Photographer: Daniel Acker/Bloomberg

Pedestrians pass a Verizon Wireless store in New York. Close

Pedestrians pass a Verizon Wireless store in New York.

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Photographer: Daniel Acker/Bloomberg

Pedestrians pass a Verizon Wireless store in New York.

Cancelling an AT&T contract costs $325, less $10 for each month of service, according to the Dallas-based carrier’s Web site.

Verizon Wireless may sell as many as 12 million iPhones in the first year it offers the device, said UBS AG analystJohn Hodulik in New York. It may draw between 3 and 4 million new customers from rival wireless carriers, he said.

The company had 92.8 million subscribers at the end of the first quarter, after adding 1.6 million during the period. AT&T had 87 million subscribers, after adding 1.9 million during the first quarter.

AT&T rose 15 cents to $24.34 at 4:01 p.m. in New York Stock Exchange composite trading. Verizon Communications Inc., which co-owns the wireless company with Vodafone Group Plc, gained 11 cents to $28.13. Apple lost $3.05 to $248.48 on the Nasdaq Stock Market.

To contact the reporters on this story: Greg Bensinger in New York at gbensinger1@bloomberg.net; Amy Thomson in New York at athomson6@bloomberg.net

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