Verizon Deal For iPhone Likely Shuts Out Cox, Other Carriers: Analysts

Verizon Wireless' deal for the Apple iPhone, expected to be announced Tuesday, probably includes an exclusivity provision barring competing wireless providers other than AT&T -- such as Cox Communications, Sprint and T-Mobile -- from landing the coveted device for the rest of 2011, according to industry analysts.

In a survey of 85 investors released last week, Morgan Stanley found that 75% said they expected AT&T and Verizon Wireless to remain the sole carriers for the iPhone this year. AT&T has been the exclusive provider of Apple's iPhone since its initial June 2007 launch.

Meanwhile, 57% expect AT&T to post one or two quarters of negative postpaid adds in 2011 because of its loss of iPhone exclusivity but be positive for the year, and 85% of investors expect the arrival of the iPhone to Verizon to cut into annual EBITDA margins by at least 100 basis points, according to the Morgan Stanley report.

Separately, Kaufman Brothers analyst Shaw Wu, in a research note Monday, speculated that Verizon Wireless would will be willing to pay Apple to keep the iPhone limited to itself and AT&T in the U.S.

Verizon Wireless "arguably needs [the] iPhone more" than Apple needs the carrier, Wu wrote.

However, the exclusivity for AT&T and Verizon Wireless probably won't extend past this year, independent telecom analyst Jeff Kagan said.

"If Verizon Wireless has another AT&T Mobility like exclusive, it will only be very short term -- months rather than years," Kagan said, adding, "I think every other carrier's mouth is now watering at the iPhone prospect."

Verizon Wireless, which is a joint venture of Verizon and Vodafone, last week issued an invitation to members of the press to an event on Tuesday, Jan. 11, in New York City hosted by Verizon president and chief operating officer Lowell McAdam, who was formerly CEO of Verizon Wireless.

The company is expected to offer unlimited data-use plans when it starts selling the iPhone around the end of January, the Wall Street Journal reported. That would be in stark contrast to AT&T, which moved to usage-based pricing plans for all smartphones in June 2010.

"The decision [by Verizon Wireless] not to cap data usage speaks to the difficulty of achieving price stability in the U.S. wireless market," Sanford Bernstein senior analyst Craig Moffett wrote in a note Monday. Moffett added that last year he compared AT&T "to Will Ferrell in Old School, streaking all alone into UBP [usage-based pricing] with the assumption that the rest of the fraternity of wireless carriers would follow. They still haven't."

Cox, the only major MSO to offer mobile phone service, last fall launched wireless service in Hampton Roads, Va., Omaha, Neb. and Orange County, Calif., with a device lineup that includes Android-enabled smartphones from Motorola, HTC and LG. In the initial markets Cox is using Sprint Nextel's 3G wireless network in a wholesale access agreement to provide voice and Internet services.

A Cox spokeswoman on Tuesday said, "While we will continuously refresh the devices we offer our wireless customers, at this time, we do not have any changes to our launch device portfolio."

Many consumers have expressed frustration with AT&T's exclusive arrangement for the iPhone. In 2009 several U.S. senators, led by Sen. John Kerry (D.-Mass.), asked the Federal Communications Commission to investigate whether the deal "unfairly restrict consumer choice or adversely impact competition in the commercial wireless marketplace."