T-Mobile: The next carrier to get the iPhone?

The iPhone is on all the major U.S. carriers except one. One analyst thinks T-Mobile is likely to get it sooner rather than later.

By TheStreet Staff Jul 12, 2012 10:29AM

By Christopher Ciaccia


The iPhone is on all the major U.S. carriers except T-Mobile USAApple (AAPL) is likely to bring its iconic device to nation's fourth-largest carrier sooner rather than later, according to one analyst.


Sanford Bernstein analyst Craig Moffett believes an agreement between Apple and T-Mobile, a subsidiary of Deutsche Telekom, is likely to happen in 2013, as it continues to play carriers against one another, increasing its leverage. Sanford Bernstein rates Apple and Deutsche Telekom shares "outperform" with a $750 and €10 price target, respectively.


T-Mobile has been hampered by the lack of an iPhone on its network, losing 8.9% of its traditional contract customers, and 5.4% of its service revenue, Moffett noted. T-Mobile has begun to ramp up its bring-your-own device strategy by strengthening its HSPA+ network. Its network now has the capability to run 3G versions of an iPhone, despite having no official contract with Apple.


If Apple and T-Mobile came to a deal, it could potentially increase Apple's U.S. sales by 5% to 10% per year, or another 2 to 4 million phones per year. It could also keep in check the subsidy issue, which Apple CEO Tim Cook has said is overblown. Carriers are subsidizing the iPhone's hefty price tag to get customers to lock into profitable contracts. Moffett also notes the ability to roll contract commitments into Deutsche Telekom's Apple contract, which "allows for a graceful way to allow all parties to make a deal less onerous than the one made by Sprint (S)."


Previously, T-Mobile has balked at buying billions of dollars’ worth of iPhones, similar to what Sprint did in 2011.


AT&T (T) was the first domestic carrier to get the iPhone, when it launched in mid 2007. In January 2011, Verizon (VZ) became the second carrier after AT&T lost its U.S. exclusivity, then Sprint (S) joined the iPhone club last year.


Sprint would be the biggest loser, should T-Mobile get an iPhone, according to Moffett. "A T-Mobile iPhone would pressure subsidies and service prices at a time when Sprint's 4G network is ill-prepared for a 4G iPhone, and the added competition could cost [Sprint] precious volumes at a time when they are already running significantly short of their annualized volume commitments to [Apple]. [Verizon] and [AT&T] would be net losers as well," he wrote.


Shares of Apple were off 1.61% Wednesday, trading at $598.42. Shares of Sprint were up 0.63% to $3.21, while Verizon were up 0.27% to $44.82 and AT&T were lower by 0.87% to $35.13.


An Apple spokeswoman declined to comment for this story. A T-Mobile spokesperson declined to comment, but pointed out that it has more than one million unlocked iPhones running on its network.


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