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Verizon may pay Apple to keep iPhone away from T-Mobile, Sprint


With the launch of the Verizon iPhone widely expected in early 2011, the wireless carrier may pay Apple to keep its smartphone off of rival networks Sprint and T-Mobile.

Analyst Shaw Wu with Kaufman Bros. said in a note to investors on Monday that he has heard from sources that Verizon is now more willing to accept Apple's terms in order to have access to the iPhone. In fact, Verizon may pay Apple even more to ensure that the iPhone remains exclusive to it and AT&T.

"We are hearing that (Verizon) does not want iPhone, the hottest selling smartphone, available on T-Mobile USA and/or Sprint and may be willing to pay for exclusivity to itself and AT&T," Wu wrote. "For these reasons, (Verizon) could be more willing to give in to Apple's terms."

He said that Apple's record-setting iPhone sales, which reached 14.1 million last quarter, have placed Apple in the "driver's seat" when it comes to negotiations. Wu also asserted that Google's Android operating system has begun to "lose some of its luster" at Verizon.

Sources also indicated to Wu that Verizon does not have high hopes for the upcoming BlackBerry 6 OS, which will introduce multi-touch gestures like on the iPhone. Verizon reportedly believes Research in Motion's upcoming mobile operating system will not have a "material impact."

Verizon is the largest wireless carrier in the U.S., with 93 million subscribers, while AT&T is just behind it. Sprint is the third-largest carrier, with 49 million, while T-Mobile is the smallest of the "big four" with 34 million subscribers.

Rumors of a Verizon-compatible iPhone have persisted since Apple's handset first launched in 2007. Since its introduction, it has been exclusive to AT&T in the U.S., though Apple has expanded to more carriers in many other countries around the world.

Numerous mainstream media outlets have reported that Apple will launch a Verizon-compatible CDMA iPhone in early 2011. Externally, the device is expected to look the same as the iPhone 4, but inside it will feature a CDMA chip from Qualcomm, as the current iPhone uses UMTS/HSPA+ technology that is not compatible with Verizon.

Those rumors gained even more credibility when Apple and Verizon partnered to sell the iPad through the carrier bundled with a MiFi 2200 Intelligent Mobile Hotspot, starting in October. The 3G iPad, however, is not compatible with Verizon's network, so the carrier sells the Wi-Fi model bundled with a portable modem.