Steve Jobs' hot new phone isn't the apple of everyone's eye. Verizon ( VZ) confirmed Monday that it passed on a chance to sell Apple's ( AAPL) iPhone, judging that a five-year exclusive sales deal came with too many strings attached. The iPhone, introduced to
much fanfare earlier this month, has since become AT&T's ( T) weapon to win back business it lost to Verizon. But Verizon execs emphasized Monday that they aren't looking in the rearview mirror. "Quite frankly, we're happy we're not the first to market with the iPhone," Verizon COO Denny Strigl said on a conference call with analysts Monday. He cited terms that would have had Verizon sharing a cut of the monthly subscriber fees and letting Apple handle customer disputes. Verizon's rejection of Apple was reported in a USAToday story Sunday, which Strigl said was "right on." The half-inch thick iPhone, with a large touch screen, music player, and 2-megapixel camera, is expected to be available for $500 in June. The move marks Apple's first venture into cell phones and is expected to be a big hit with gadget lovers, who are already enamored with the iPod. AT&T declined to comment on the details of its iPhone contract. "We think our arrangement with Apple is a win for us and for Apple," a representative said Monday.
On Monday, Verizon rose 16 cents to $37.99, AT&T added 34 cents to $36.74 and Apple rose 52 cents to $85.90. Exclusive deals on phones are hardly unknown -- take Verizon's deal with Motorola ( MOT) on the Q email phone. Most phone companies subsidize a portion of the cost of a new user's phone to win a one or two-year contract. Still, analysts say never before has a phone maker demanded a revenue-sharing deal from a telco. The news comes as Verizon posts another
blowout quarter in its wireless division, jointly owned with U.K. telco Vodafone ( VOD). For the fourth quarter, Verizon added 2.1 million conventional retail customers. That's more than double the 861,000 net new postpaid users AT&T's wireless unit gained in the same period. With Sprint ( S) sputtering and spitting out customers and AT&T performing wanly, Verizon has been able to gain ground over the past year with a higher-paying, more loyal customer base. But winning streaks don't last forever. Now, some industry observers and investors have grown concerned that Verizon could face more of a challenge in wireless in the second half of the year. Assuming a total collapse isn't in the works, Sprint could one day regain its footing and stop its massive customer defections, which seem to have helped fuel Verizon's growth. Even more troubling, perhaps, is the expected impact of iPhone sales on both Verizon's numbers and AT&T's.
Though it is ridiculously expensive and somewhat limited in data storage capacity, Apple's iPhone does promise a far more engaging multimedia experience and an ultrasleek package. Should it catch on, AT&T could have quite a user magnet on its hands. The last iconic phone, Motorola's Razr, last quarter passed 70 million handsets sold. Had one carrier owned the exclusive sales rights to the Razr, it's probably fair to say its marketshare would have jumped. But Verizon's operation chief Strigl says it's a little too early to start conceding anything to iPhone. Weighing a future offering against what's on the market today is "like comparing apples and oranges," Strigl says. Verizon has confidence that its phone makers like LG, Motorola and Samsung will have compelling designs to compete with the iPhone, Strigl says. Overall, says Strigl, the iPhone's music features will help "draw attention to our data capabilities."