Since the epic launch of Iphones in June 2007, AT&T has been its exclusive carrier. The Iphone granted AT&T greater sales in shares than one of its major competitors, Verizon. Thanks to the Iphone, AT&T shares have increased 22% versus the Verizon’s 13%.
However, speculation, made by the Wall Street Journal in October 7, 2010, perdicted Verizon will begin selling the device starting Feburary 10, 2011. This speculation has caused an increase in Demand for Verizon shares (11%), and a slight decrease in demand for AT&T.
Professional investors—like Sergey Dluzhevskiy, who is currently a telecom Analyst for Gabelli & Company, a N.Y investment firm—strongly believe Verizon will gain plenty of costumers because of their new approach in business. This year, 12 million people will line up and buy iphones sold by Verizon. 9 million of the costumers will consist of existing Verizon users who are looking forward to the upgrade, 2 million are users stolen from AT&T, and 1 million will come from other carriers. Due to a certain amount of customers switching from iphones sold by AT&T to Verizon labled iphones, one can expect a decrease in demand (10%) and price of iphones sold by AT&T in stores, and an increase in demand and price of Iphones sold by Verizon—if all other factors remain equal. Because of the expected decrease in price of AT&T products, investors will naturally expect their profits to decrease as well.
Professionals believe the decrease in demand for AT&T iphones should not be expected to go below 10% due to a high level of brand loyalty from existing users and the expensive cost of switching. According to Dluzhevskiy, 80% of AT&T users applied for business or family plans, “which makes switching akward,” and nearly half of them already activated the device within the past six months, making switching expensive.
Gadget Reviewers Walt Mossberg and David Pogue updated consumers on Verizon’s and AT&T’s Iphone. AT&T has a higher percentage of smart phone customers, which usually comes with pricey data plans. Unless AT&T finds a way to make their iphones less expensive in the long run, the data plans would probably scare off consumers to the cheaper Verizon Iphone, closing the gap between the two companies in the future.
In the short term , AT&T is expected to have higher earnings than Verizon. Investors are naturally overly focused on the short term earnings targets. Thus the title of my source, “Iphone Curse Says time to Favor AT&T stock.”
Ralph Tsmith
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