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BlackBerry Fans Wait as Carrier Scrutiny Causes U.S. Lag

BlackBerry’s latest phone faces a lengthy testing process by carriers in the U.S., its biggest single market, further delaying the arrival of a product that was already more than a year late.

Verizon Wireless and AT&T Inc. (T), the two largest U.S. wireless-service providers, have multistep tests that can take months to complete. The devices are checked for signal strength, battery life, call quality, heat tolerance and data performance, according to the carriers. BlackBerry has said that all the carriers got the new phone at the same time, putting its wireless partners on equal footing when the testing began.

The slow process means the new Z10, unveiled at a New York event this week, will go on sale in the U.S. in March -- more than a month after its debut in the U.K. yesterday. The lag has frustrated efforts to roll out the phone globally, contributing to a 17 percent decline in BlackBerry (RIMM)’s shares. It also means the company is getting less value from its first-ever Super Bowl ad this weekend, when no one in the U.S. can buy the phone.

“It’s really hard to have a global, simultaneous launch of anything,” Tavis McCourt, an analyst with Raymond James & Associates in Nashville, Tennessee. “And you only get one chance a year for a Super Bowl ad.”

Photographer: Scott Eells/Bloomberg

The new BlackBerry 10 is displayed during the device's launch in New York, U.S., on Wednesday, Jan. 30, 2013. Close

The new BlackBerry 10 is displayed during the device's launch in New York, U.S., on... Read More

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Photographer: Scott Eells/Bloomberg

The new BlackBerry 10 is displayed during the device's launch in New York, U.S., on Wednesday, Jan. 30, 2013.

U.S. Last

When BlackBerry unveiled the new smartphone this week, it gave a range of release dates for the product’s initial markets. British carriers such as Vodafone Group Plc (VOD) began offering the Z10 yesterday, while Canadians will get the phone on Feb. 5. It arrives in the United Arab Emirates on Feb. 10.

After five days of declines, BlackBerry shares climbed 0.4 percent today to $13.03 at the close in New York. The stock rose 9.4 percent in January.

BlackBerry, based in Waterloo, Ontario, didn’t offer a firm release date for the U.S., saying it would be sometime in March. After the slow rollout irked investors, Chief Executive Officer Thorsten Heins said the U.S. carriers’ lengthy testing was the main reason for the later arrival.

All the carriers got the final software for the phones, known as the “gold code,” at the same time, Heins said in an interview this week. U.S. service providers received the phones themselves at the same time as other carriers around the world, BlackBerry confirmed yesterday.

“Verizon, AT&T, Sprint, T-Mobile -- they have to comply with certain rules they are subject to,” Heins said. “They’re trying to speed it up.”

‘It’s Different’

The situation reflects a balance of power in the U.S. where carriers rather than phone manufacturers dictate the terms, said Michael Cote, a wireless strategist at the Cote Collaborative in Chicago.

“It’s different for phone makers here,” said Cote, a former sales executive at T-Mobile USA, the fourth-largest U.S. carrier. “U.S. carriers are accustomed to running roughshod over phone manufacturers.”

An exception to that rule may be Apple Inc. (AAPL), which demanded a revenue-sharing agreement from AT&T when the companies first introduced the iPhone in 2007. When Sprint Nextel Corp. (S), the No. 3 carrier, got the rights to the iPhone in 2011, Apple required it to buy at least $15.5 billion worth of the phones -- a requirement that weighed on Sprint’s shares.

Even knowing that U.S. carriers take longer to approve phones, BlackBerry failed to get the new model to American carriers sooner than its overseas partners. The company has been racing to finish developing the phone following multiple delays that put the Z10’s debut at least a year behind schedule.

Comeback Plan

BlackBerry, formerly known as Research In Motion (RIM), is counting on the new products to reverse six quarters of sales declines and win back market share from Apple and Google Inc.’s Android. Despite positive reviews for the Z10, BlackBerry shares tumbled for a second day yesterday amid concerns that U.S. sales will suffer from the delay.

The BlackBerry Q10, a second model equipped with a keyboard, is set to go on sale in April. No specific date was given for any carrier debut of that device.

Mark Siegel, a spokesman for Dallas-based AT&T, declined to comment on the BlackBerry delay.

Torod Neptune, a spokesman for Basking Ridge, New Jersey- based Verizon Wireless, said the testing process can be more lengthy for devices running on new operating systems, as is the case with the Z10 and Q10.

“There’s really no typical length of time for a phone to go through testing,” he said. “We have a rigorous and extensive testing protocol, and how long that process takes depends on the device and the issues we may encounter.”

To contact the reporters on this story: Scott Moritz in New York at smoritz6@bloomberg.net; Hugo Miller in Toronto at hugomiller@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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