- Jul 1, 2010
http://online.wsj.com/article/SB10001424052748703309704575413672727878934.html?mod=googlenews_wsjAT&T Downplays iPhone Pact Risks
Carrier Says Any Loss of Exclusivity Won't Have 'Material' Impact
AT&T Inc. said Friday it doesn't expect to suffer a "material negative impact" from the end of its exclusive arrangements to carry handsets, including its lucrative deal for Apple Inc.'s iPhone.
The comments came in a lengthy discussion of the value of exclusive deals in AT&T's latest quarterly filing with the Securities and Exchange Commission.
It was the first time the carrier has addressed the most closely watched issue regarding its future in such depth in a formal filing.
"We do not expect any such terminations to have a material negative impact on our wireless segment income, consolidated operating margin or our cash from operations," AT&T said in the filing with regulators on Friday.
The iPhone is AT&T's best-selling phone and is widely considered to be single-handedly keeping the carrier from losing customers to rival Verizon Wireless.
AT&T has held exclusive rights to cary the device in the U.S. since it was introduced in 2007.
Speculation that the exclusivity contract could be nearing an end has weighed on AT&T's stock price.
Explaining the lack of impact on its business, AT&T said more than 80% of its contract customers are on family or business plans that are less likely to see turnover.
The company also said it now carries a range of smartphones, reducing its dependence on any particular one, and said new devices continue to roll out in the fast-changing industry.
"Such arrangements may not provide a competitive advantage over time, as the industry continues to introduce new devices and services," AT&T said of exclusive deals.
Were AT&T to lose exclusivity over the iPhone, the carrier likely wouldn't see large financial repercussions in the short term, since most customers would still be locked into their contracts, analysts said. But a slowdown in customer additions could muddy projections for the company's future, they said.
"The question that people will care about is the operating metrics," said Macquarie analyst Phil Cusick. "It's the growth trajectory of the business that's at stake."