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Verizon iPhone? Maybe Never

NEW YORK ( TheStreet) -- What seemed like a done deal earlier this year -- the Verizon iPhone -- now has the appearance of a deal undone.

Verizon (VZ - Get Report) may have taken another pass on the Apple (AAPL - Get Report) iPhone for the same reason it rejected the offer three years ago. Verizon is apparently still unwilling to relinquish control of its customers to Apple.

Apple's iconic iPhone has changed the smartphone industry, but Verizon hasn't changed its mind about Apple, according to Morgan Stanley analyst Ehud Gelblum.

"Interestingly enough, not because Apple isn't giving it to them but, for the most part, because Verizon doesn't want it," Gelblum said in a recent report citing conversations with phone companies and industry gearmakers.

Apple declined to comment. Verizon wasn't immediately available.

The problem for carriers like Verizon and AT&T (T - Get Report) is that while the iPhone brings scores of high-spending new subscribers, those subscribers become Apple customers, using iTunes and the App Store to make all their purchases.

"The carrier is kind of shut out of the picture and relegated to being a dumb pipe," Gelblum says.

Verizon got a glimpse of this Apple-controlled future a few years ago and fled.

In 2006, when first approached by Apple to carry the iPhone, Verizon took one look at Apple's closed marketplace and said no thanks, according to people at Verizon. The iPhone then landed at AT&T.

To counter the impact of the iPhone at AT&T, Verizon teamed with Google (GOOG - Get Report) and Motorola (MOT) on the Droid phone and tightened ties with Research In Motion (RIMM).
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Last year, and then again earlier this year, it became widely accepted that once AT&T's exclusive deal with Apple expired, the iPhone would go to Verizon. The move made sense as Apple could cash in on whatever pent-up demand there was among the 80 million-plus users at Verizon.

But that move seemed to derail when Apple's iPad was unveiled. The iPad was also expected to have a Verizon connection, but AT&T prevailed with a pay-as-you-go data plan.

A new version of the iPhone is expected to hit the market this summer, but don't hold your breath for a Verizon-branded iPhone.

--Written by Scott Moritz in New York.


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