Verizon May Sell 2 Million IPhones as It Battles AT&T

Verizon Wireless, the wireless carrier whose stores begin offering the iPhone today, may sell 2 million or more of the devices this quarter and draw subscribers from AT&T Inc., analysts said.

Verizon, which is ending Dallas-based AT&T’s monopoly on the Apple Inc. phone in the U.S., will start sales at 7 a.m. New York time. Initial online sales to existing Verizon users Feb. 3 ended within hours after the company exhausted its stock.

The carrier gaining the iPhone will intensify competition in the U.S. smartphone market and curb customer growth at AT&T, said Craig Moffett, an analyst at Sanford C. Bernstein & Co. The threat of losing users may encourage AT&T to increase subsidies on its devices, which would force other carriers to match the lower prices, benefiting consumers, he said.

“It’s unrealistic to think that AT&T is simply going to watch as their subscriber growth falls off the table,” said New York-based Moffett, who rates Verizon “underperform.” “They will obviously try to present a more compelling lineup of Android phones and Windows 7 phones of their own, but the main event will be what they do with pricing.”

Verizon may sell 2 million iPhones this quarter, according to Rick Franklin, an analyst at Edward Jones & Co., Jennifer Fritzsche at Wells Fargo Securities LLC and Ashok Kumar at Rodman & Renshaw LLC. Sales in the first week may top 1 million units, said Mike Abramsky of RBC Capital Markets LLC. The device went on sale online on Feb. 9.

Preorders Exhausted

Verizon will sell 9 million iPhones or more this year, Abramsky predicts. Verizon said last month 2011 sales and profit may jump as much as 8 percent if it sells 11 million iPhones. AT&T, which had exclusive rights for the device since its 2007 release, activated more than 15 million iPhones last year.

Verizon sold more than 500,000 iPhones through preorders, estimates Philip Cusick, an analyst at JPMorgan Chase & Co. On Feb. 3, the carrier said it sold more iPhone 4s in two hours than any other Verizon product had sold in its first day. Verizon stopped accepting orders because of the demand.

A 16-gigabyte iPhone 4 costs $199.99 at Verizon and a 32- gigabyte version $299.99, matching the prices at AT&T.

Verizon Communications Inc., the New York-based company that co-owns Verizon Wireless with Vodafone Group Plc, added 34 cents to $36.68 on the New York Stock Exchange yesterday. AT&T gained 6 cents to $27.97. Apple, based in Cupertino, California, rose $2.96 to $358.16 in Nasdaq Stock Market trading.

‘New Front’

The iPhone 4 is the fourth generation of the device. The iPhone is Apple’s top-selling product, accounting for 39 percent of its revenue in the first quarter, more than Macintosh computers and iPads combined.

Adding Verizon allows Apple to roughly double the number of customers it can reach in the U.S. Apple is facing increased competition from Samsung Electronics Co., HTC Corp. and Motorola Mobility Holdings Inc., whose smartphones run Google Inc.’s Android operating system.

Android phones accounted for 28.7 percent of U.S. smartphones in the U.S. in the quarter ended in December, compared with 25 percent for Apple, according to ComScore Inc.

“They are opening up a new front in the cellular phone wars,” said Michael Yoshikami, chief investment strategist at YCMNet Advisors in Walnut Creek, California, which owns Apple shares.

The new iPhone, based on CDMA technology, may let Apple expand in international markets where that standard is used, said Brian Marshall, an analyst at Gleacher & Co. in San Francisco. CDMA carriers include Japan’s KDDI Corp. and Beijing- based China Telecom Corp., he said.

The Verizon iPhone is different than the original iPhone 4 released in July, according to an analysis of its components by IFixit. One change is to the antenna design, according to IFixit. The design of the antenna was criticized last year because calls were dropped if the phone was held a certain way.

“Apple is really focused on being a wireless mobile company more than a computer company,” Yoshikami said. “The Verizon iPhone is just one step towards that.”