With the Verizon iPhone release, AT&T must boost customer satisfaction

Apple will probably introduce a version of the iPhone that works on Verizon Communications' network early this year, creating a challenge for AT&T Inc., until now the exclusive U.S. distributor of the device.


AT&T, ranked last in user satisfaction by a Consumer Reports survey last month, has reason to be concerned about losing the iPhone arrangement it has held since Apple introduced the device in 2007, but the damage may not be as severe as anticipated.
At least initially, Verizon's iPhone may have weaknesses compared with AT&T's. The expense and hassle of changing carriers could also work to AT&T's advantage, according to Charles Golvin, an analyst with Forrester Research in Cambridge, Mass.
"I'm sure some AT&T customers are sufficiently frustrated to switch, but the vast majority are at least happy enough," Golvin said.


Apple's introduction of a Verizon iPhone will come after next week's Consumer Electronics Show in Las Vegas, according to a person familiar with Apple's plans who isn't authorized to discuss them publicly. Estimates from industry analysts of the resulting number of defections to Verizon from AT&T range from 1 million to 6 million.


John Hodulik, an analyst at UBS AG in New York, comes in somewhere in the middle. He predicted that AT&T will sell 8.8 million iPhones in 2011, down from 15.6 million in 2010. Of the 13.3 million Hodulik expects Verizon to sell in 2011, about 2.3 million will be to AT&T refugees, he predicted. An additional 10 million will be Verizon subscribers who upgrade from other devices, and the rest will come from other carriers.


Still, even if AT&T loses more than twice as many customers as Hodulik projects, the carrier will not suffer a fatal blow. If 6 million of its customers defect, the $6 billion in lost annual revenue would amount to about 10 percent of AT&T's wireless sales in 2011, according to UBS projections. The $6 billion would be 4.8 percent of its total projected sales of $126 billion in 2011.

Promoting alternatives

AT&T is expected to try to mitigate the damage by promoting iPhone alternatives, such as cheaper devices that use Google's Android mobile software, said Mark Lowenstein, a former Verizon executive who is managing director of consulting firm Mobile Ecosystem.
Others hurt in the unfolding iPhone tale may well be rival carriers Sprint Nextel Corp. and T-Mobile USA. There are no indications that Apple plans to make an iPhone for either of them. Without Apple, their subscriber rolls could fall in 2011 by 650,000 and 950,000, respectively, Hodulik said.