AT&T is reportedly in negotiations with Apple to extend its exclusive contract to carry the iPhone in the US beyond next year, when the contract is set to expire. The iPhone, which has now sold 17m units worldwide, is integral to AT&T’s strategy of moving its core business from the shrinking landline market to the growing mobile sector.
According to CEO Randall Stephenson, AT&T now serves 77m mobile customers, compared to just 30m landline clients. He recently told the Wall Street Journal that his priority is to cater for these customers. This means removing out-of-date business practices, for instance the requirement to pay for AT&T’s home phone service in order to qualify for discounted broadband and TV. Stephenson now wants to offer these discounts to mobile customers as well.
It is understandable for a mobile operator to want to keep an exclusive iPhone deal. As well as being an extremely popular handset, the phone seems to encourage more use of auxiliary services, such as data plans and GPS.
Renewing the iPhone deal would be an important boost for AT&T. However, it would not solve all the company’s problems. The firm recently laid off 12,000 of its staff, approximately 4% of its workforce. Most of the redundancies were felt by its landline business.
Another concern is that offering customers cheap iPhones could be costing AT&T money, even if the firm eventually recoups the sum in monthly bills. In its Q4 2008 earnings report, AT&T revealed that iPhone subsidies are costing the firm an estimated USD450m per quarter. These costs may have inspired the company to offer the iPhone without a contract at a cost of USD599 for the 8GB model and USD699 for the 16GB version.
StrategyEye's related categories: Mobile Operators - General, Mobile Phone Devices
StrategyEye's related companies: Apple, Inc., AT&T
