With no iPhone to offer customers, Verizon (s vz) has turned largely to Google Android (s goog) 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 (s 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 (s aapl), 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 (s rimm): BlackBerry devices accounted for more than 90 percent of Verizon’s smartphone sales just 14 months ago. The rise of Android (s goog) 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.
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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