Apple Inc. plans to begin producing this year a next generation of iPhones that could allow U.S. phone carriers other than AT&T Inc. to sell the iconic gadget, sources tell the Wall Street Journal.
The new iPhone would work on a type of wireless network called CDMA, these people said. CDMA is used by Verizon Wireless, AT&T’s main competitor, as well as Sprint Nextel Corp. and a handful of cellular operators in countries including South Korea and Japan. The vast majority of carriers world-wide, including AT&T, use another technology called GSM.
With Apple developing a phone with CDMA capability, its exclusive U.S. arrangement with AT&T dating to 2007 appears set to end.
Verizon Wireless, owned by Verizon Communications Inc. and Vodafone Group PLC, declined to comment. Apple also declined to comment.
“There has been lots of incorrect speculation on CDMA iPhones for a long time. We haven’t seen one yet and only Apple knows when that might occur, ” an AT&T spokesman said.
For AT&T, the Apple relationship has been crucial, helping to make the carrier the U.S. leader in lucrative smart-phone market share. According to comScore Inc., AT&T has over 43% of all U.S. smart-phone customers, compared with 23% for Verizon. These customers are especially attractive because they generally pay higher monthly rates for data plans.
AT&T’s growth has come almost single-handedly from the iPhone. In the fourth quarter of 2009, the carrier said it activated 3.1 million new iPhones. In comparison, it counted only a net total of 2.7 million new subscribers as some customers moved from other phones to iPhones.
AT&T’s relationship with Apple, a lucrative deal arranged by Steve Jobs, the Apple Chief Executive, shows how such a partnership with other carriers could present challenges.
Analysts estimate AT&T pays Apple more than $600 per phone, but sells most of them for $199 or less. Heavy iPhone users have also put an enormous load on AT&T’s wireless network, pushing the carrier to a breaking point in some markets such as New York and San Francisco. [via Wall Street Journal]