AT&T (NYSE:T), the second largest mobile operator in the US, has had an exclusive agreement with Apple (NASDAQ:AAPL) to distribute its iPhone in the US since the launch of the phone in 2007. Despite subsidizing the phone, AT&T has generated significant value from the iPhone in the past two years. The phone’s widespread use has helped AT&T gain market share and boost its mobile phone revenue.
Mobile Phones & Plans 43% of AT&T’s stock
AT&T sells mobile phones to customers along with prepaid or monthly payment subscriber plans. We estimate that the Mobile Phones & Plans business constitutes about 43% of $37 Trefis price estimate for AT&T’s stock.
iPhone Added 2% Market Share to AT&T
Apple sold about 43 million iPhones globally from June 2007 through the end of 2009. During the same period, AT&T’s subscriber count increased by about 22 million, implying more than a 2% rise in market share, with the iPhone driving a significant part of the increase.
In addition to the monthly subscription fee that AT&T earns from iPhone subscribers for voice service, the company earns higher monthly data (internet, SMS) fees from iPhone subscribers than it does from the average AT&T subscriber. About 3% of iPhone users generate 40% of the data traffic on AT&T’s network.
Currently we estimate that AT&T’s mobile phone market share will stabilize around 31% by end the Trefis forecast period.
The migration of iPhone users to competing networks like Verizon (NYSE:VZ) and Sprint (NYSE:S) in the US would hurt AT&T’s mobile voice business and its mobile data (internet, SMS) business. You can modify the forecast above to see how AT&T’s stock could be impacted if the loss of iPhone exclusivity were to result in erosion of its mobile subscriber market share.