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Summary:

Without an iPhone, Verizon has made a good showing in smartphone sales by embracing a wide variety of Google Android smartphones. On the surface, that appears to have paid off, but a closer look at the numbers show that AT&T’s iPhone is outselling them all.

iphone4-back

With no iPhone to offer customers, Verizon has turned largely to Google Android smartphones. On the surface, that strategy has paid off, as Verizon continues to hold the top spot for mobile subscribers in the U.S., although AT&T is nipping at its heels. But detailed data showing Verizon’s smartphone sales surfaced this weekend, and if the information is accurate, paints a different picture: Verizon needs Apple’s iPhone, or else it risks losing its biggest carrier status.

The sales data appeared in a report from ITG research analyst Matthew Goodman, first showing an alarming trend for Research In Motion: BlackBerry devices accounted for more than 90 percent of Verizon’s smartphone sales just 14 months ago. The rise of Android devices from multiple manufacturers has since eroded RIM’s share of Verizon smartphone sales to under 20 percent, as of last month. Verizon customers have, instead, turned to Google Android phones, presumably because they’ve found Android to be a reasonably acceptable substitute for an Apple iPhone, or a BlackBerry handset, for that matter.

Asymco’s Horace Dediu took the sales data a step further by comparing Verizon’s smartphone sales against those of AT&T’s iPhone. Assuming the ITG data is correct, Verizon’s strategy to offer several Android phones actually hasn’t competed well. Add up the total number of Android phones Verizon has sold in the last few quarters, and AT&T has still sold more iPhones. Even with a multi-device strategy based around Google Android, Verizon is losing sales ground to a device on a single platform.

Image credit: Asymco

The largest gap between AT&T’s iPhone sales and all of Verizon’s smartphone was in the third quarter of this year, which very likely got a huge bump from the iPhone 4 debut. We’ll have to wait to see the fourth quarter sales numbers to see if the trend continues or not. Even so, the numbers are alarming for Verizon because it means Verizon’s entire smartphone portfolio is getting outsold by Apple’s iPhone on the AT&T network. And more consumers, not fewer, are buying smartphones, with some estimates suggesting 50 percent of U.S. mobile subscribers carrying a smartphone by this time next year. On its most recent investor call, Verizon reported that only 23 percent of its retail postpaid customers have smartphones, so there’s ample opportunity for sales growth in 2011.

Between now and then, however, many are pinning hopes on Verizon working a deal for an iPhone of its own. As I said back in June, there are a few tangible reasons why 2011 is likely to see an iPhone on Verizon’s network. Since that time, there has been no lack of rumors and reports suggesting it will happen; odds are favorable that Verizon will offer an Apple iPhone next year.

If Verizon does land the iPhone in 2011 as expected, it would likely reverse the trend of AT&T smartphone sales dominance in the U.S. and keep Verizon in the top subscriber spot, but the question is: by how much? Verizon could offer early upgrades to existing customers who want an iPhone, which would help sales figures, but won’t affect the total number of subscribers. It may come down to an issue of perception in terms of how consumers believe both networks perform, something that despite heavy upgrade investments and marketing, AT&T continues to battle; Consumer Reports recently named it the worst network carrier in the U.S.

For many, Verizon is seen to have a more reliable network, although experiences vary by location and coverage. What doesn’t vary is the heavy promotion Verizon is giving its new LTE network, which offers blazing fast speeds even if it doesn’t technically qualify as a 4G network. And the carrier did say that the first LTE handsets for the network will arrive in 2011. I’m not suggesting that one of those first LTE phones will have an Apple on them, but if it does, I’d expect Verizon to reverse the current trend and start pulling away from AT&T in terms of smartphone sales.

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  1. “Verizon customers have instead turned to Google Android phones, presumably because they’ve found Android to be a reasonably acceptable substitute for an Apple iPhone”

    Did it ever occur to you that maybe they just want an android phone? The assumption by most bloggers that the majority of people buying android phones are doing so because they can’t get an iphone is really frustrating. If that was the case, I doubt we would see such a huge rise in android market share in the United States.

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    1. Good point and I’m sure there are many other reasons as well. My thought was based on survey data: back in May, around 53% of respondents (customers on Verizon) said they would likely buy a iPhone if it were available on their network.

      http://gigaom.com/apple/verizon-customers-want-iphone-cant-have-it/

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      1. Android devices have really made the entry into competition this year. Therefore it can be said that a survey from May is old. There are much more different Android devices available now than back in May.

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      2. I don’t think the survey results are completely invalid at this point in time, but yes, there are more Android devices available now, many of which are compelling.

        That doesn’t change the fact that based on the most recent sales figures, the iPhone on AT&T has been outselling all Android phones on Verizon’s network. If Verizon does get the iPhone, it has a chance to gain some current iPhone owners away from AT&T and be additive to sales & subscriber count, regardless of how well Android is selling for Verizon.

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      3. Its all about how you look at the data, how many of those iphone purchase in Q3 were upgrades from iphone-3 to iphone-4, so not really increasing customers for AT&T.

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  2. This isn’t research. This isn’t informative. This isn’t interesting opinion. This isn’t worth reading.

    This is an Apple press release.

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  3. +1 on Android being a choice, and not a last resort.

    I’d also argue that Verizon would sell even more Android phones if they didn’t get greedy and Bing half the handsets. They also need to offer at least one new stock Android phone (I know Droid 1 is). Nexus S would do very well I think in a CDMA version on VZ.

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    1. Peter,
      I think the biggest reason people flock to the iPhone is that the carriers in general completely suck at customer service and product sales, while Apple seems to have a good handle on it.

      This manifests itself by Apple being trusted by more folks than say, AT&T or Verizon (Google has a similar position vs. the carriers).

      If the data and analysis is accurate, the major take-away is that Google needs to take a stronger hand in the OHA and Android and deliver a better customer experience rather than simply let Verizon or the other carriers to themselves.

      If Google steps up and keeps the carriers in check, then they can provide a strong alternative to Apple. If they don’t then people will chose Apple vs. your average carrier any day.

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  4. I hope Verizon does get an iPhone! If they do I am going to sell my AT&T iPhone at http://www.cash4iphones.com and switch carriers. So tired of dropped calls!

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  5. My personal experience is that many people buy an Android device because it does enough of what they need to do. From an app perspective, could they be more sophisticated and polished? Sure. But, over the coming months this will change.

    Android is a solid choice. The question is, besides text and email, what does Blackberry do well? Definitely not web!…

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  6. What percentage of iPhone 4 sales replaced iPhone’s (3 or 3gs)?

    For years Apple played this game with iPod sales. While it’s true they had sold 100 million iPods, half of them were no longer in service. You need to add life expectancy of the product into the mix to understand the numbers. Raw unit sales by themselves are pretty meaningless.

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    1. Unit sales may be meaningless to carriers, who rely on the incoming, monthly revenue of their installed base. (The same is also true of Google, w.r.t. advertising and application sales.) But unit sales is mainly where the manufacturers (Motorola, Samsung and Apple) make their money. If I buy a smart phone off-contract, or break my contract before the early termination fee lets the carrier break even, the manufacturer has made its money off me. So, to that extent, comparing Verizon to Apple is apples and oranges.

      But in the marketing fairy-tale world where every buyer in the smartphone market really wants an iPhone on Verizon and nobody breaks their contracts: The folks who settled for a Droid on Verizon can reach the promised land after 18 months on-contract while the folks who settled for an iPhone on AT&T have to wait 24.

      If we assume all of this is true, and this is where the unit-sales figures come back into play, the longer Verizon waits to introduce the iPhone to its network, the more people will be trapped in this six-month gap where they can’t ditch AT&T for Verizon, but they could have ditched Android for iPhone.

      I don’t believe these assumptions, myself, but it’s in the job description for technology reporters.

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    2. The short answer to your question is 76% of iPhone4 purchases in Q3 were from existing AT&T customers; presumably a large percentage owning and earlier version of the iPhone. But the question goes to the crux of the article; that’s market share. Unit sales tell you very little about market share. In Q3 AT&T sold 5.2m iPhones but activated only 1.3m new iPhone customers. They lost 500k customers with other devices so the net additions were 745k, a far cry from 5.2m. Verizon added 584 similar customers. Year to date they are at 1.7m each, not exactly a huge swing in market share.

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  7. I’m not sure I conclude the same thing you do from that data. Verizon will surely get a huge boost from access to the iPhone, but Android options have been pivotal in reducing attrition.

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  8. It is not that no one buys an Android phone for Android is that non tech customers but Verizon Droid’s because they can not get an iPhone and they have or want a Verizon phone.

    Most Droid owners don’t even know what Android is. The problem is that Google’s Android is not a consumer brand, the iPhone is the Droid is and even the Galaxy is.

    The Android market is not just segmented by operating system version but also by consumer branding. The do not have the same kind of brand awareness that Windows or Intel achieved. And while Google is maturing quickly they are still a very poor consumer marketing organization.

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  9. [...] new Android tablets and increasing developer support push Android forward. Or it could further illustrate what my colleague Kevin wrote about yesterday, that Android phone sales on Verizon Wireless were overtaken by iPhone sales on AT&T in the [...]

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  10. [...] developer support push Android forward. Or it could further illustrate what my colleague Kevin wrote about …, that Android phone sales on Verizon Wireless were [...]

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