AT&T’s contract with Apple to be the exclusive retailer of the iPhone ends next year, and company CEO Randall Stephenson is pushing to get the contract extended until 2011, according to unnamed sources in The Wall Street Journal.
Officially, AT&T remains tight-lipped about its contract with Apple. “It’s a multi-year relationship and we haven’t gotten specific beyond that,” says AT&T spokesman Mark Siegel. Apple did not reply to requests for comment by press time.
Maintaining its exclusivity is strategically important for the carrier. “The iPhone has now proven to be a big success and AT&T would be crazy not to want to keep the exclusivity as long as they can,” says telecom analyst Jeff Kagan.
In last year’s third quarter, the device single-handedly spurred the largest net gain in postpaid wireless subscribers in the company’s history. Nearly 4.3 million iPhone 3G devices were activated in the second half of 2008, with about 40 percent of those customers new to AT&T. Additionally, iPhone customers are high-value subscribers with a significantly higher ARPU and lower churn rates than the average postpaid customer.
If AT&T loses its hold on the iPhone, the device could be carried on rival networks and would unseat the company’s position as its sole carrier. Rival carrier Verizon Wireless initially passed on the iPhone deal, but could have access to the device if AT&T’s contract with Apple is not renewed.
AT&T, like many telecom companies, is dependent on growth in its wireless segment to offset continued landline defection. The company has 77 million wireless customers compared to 30 million consumer phone lines. “The wireless part of AT&T is the growth engine, along with television and broadband,” Kagan says.