This week Verizon will announce that the Apple (NASDAQ: AAPL) iPhone will be available through its wireless network, which it co-owns with Vodaphone (NYSE: VOD). The deal will be part of a presentation by the huge telecommunications company scheduled for Tuesday, according to a number of media reports. Verizon may find that the partnership is a mixed blessing. It is not clear that wireless companies can make money on iPhone deals with Apple.
Verizon has been hurt by the exclusive relationship between Apple and AT&T, which made the latter the sole distributor of the iPhone in the US. The AT&T initiative to add subscribers using the handset has been crippled by trouble with its 3G network.
The new battle between AT&T Wireless and Verizon Wireless will go well beyond the Apple handset. Each company has begun to roll out huge 4G networks which will eventually run on the LTE technology. The 4G infrastructure allows wireless connection speeds which are close to those of cable. The 4G products will probably be priced well above 4G. It remains to be seen whether most of the public believes that it needs the new products.
The Verizon deal is a financial coupe for Apple. Industry observers believe that Apple charges telecom companies as much as $600 for each iPhone. The money is recouped by the two-year subscriber deals that customers have to enter when they get the phone from carriers. This may or may not be profitable.
Verizon could still lose money on the iPhone deal. AT&T may have lost money on a similar relationship since the day its began to sell the handset to its customers.
Douglas A. McIntyre
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