Tough Year Ahead for AT&T

By Reuters  |  Print this article Print

Verizon's offering of Apple's iPhone is expected to make for a tough year ahead for AT&T as customers switch to Verizon's network. AT&T has fallen under much criticism for the performance of its network.

On the other hand, AT&T is expected to face its toughest year since 2004 as a result of the Verizon deal with Apple.

AT&T, which has come under fire for patchy wireless service in some cities, nonetheless added an estimated 15 million new iPhone customers in 2010. It has tried to reduce its dependence on the iPhone by adding other devices to its service.

"For iPhone users who want the fastest speeds, the ability to talk and use apps at the same time, and unsurpassed global coverage, the only choice is AT&T," an AT&T spokesman said following the Verizon announcement.

Another company facing a threat from the new deal is phone maker Motorola Mobility, which has made a comeback as the flagship phone vendor at Verizon Wireless in 2010.

Motorola phones run on Google Inc's Android software, which has become Apple's most formidable rival in cellphone technology.

One problem for Verizon Wireless may be the high cost of selling Apple products, which come at a premium to other smartphones, analysts said.

Like AT&T, Verizon Wireless will have to shoulder part of the cost of the devices to convince people to sign long-term contracts.

Verizon Wireless will have to pay a $400 subsidy for each iPhone it sells if it keeps the price in line with AT&T's, UBS analyst John Hodulik estimated.

Shares of Verizon closed off 1.6 percent at $35.36, while AT&T shares were down 1.5 percent at $27.91. After reaching a record high the day before, shares of Apple slipped 0.24 percent to close at $341.64.

(Additional reporting by Gabriel Madway in San Francisco, Jim Finkle in Boston, and Jennifer Saba, Ritsuka Ando and Liana Baker in New York. Writing by Paul Thomasch. Editing by Robert MacMillan and Matthew Lewis)