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With the launch of Apple’s iPhone at Verizon Wireless (NYSE:VZ) Tuesday the histrionics over AT&T (NYSE:T) are about to commence. Here’s the story line: AT&T will lose customers, momentum and will be lost without the iPhone. The reality is far more nuanced than that.

To see this duel over AT&T here’s a look at two excerpts from Wall Street analysts pondering the launch of the Verizon iPhone.

First up, Piper Jaffray analyst Christopher Larsen:

While AT&T’s iPhone exclusivity has brought in many new customers from other carriers, this trend has waned in recent months; most iPhones sold today are upgrades for current AT&T customers. (However, the recent lower price points at $99 and $49 for refurb and 3GS appear to have driven some measurable traffic post-Christmas.) The real question is will AT&T customers defect for the Verizon iPhone? We don’t think so. Nearly 80% of iPhone users are on a family plan or corporate plan and approximately 75% still have at least a year left on their contracts, by our estimates.

And then there’s Hudson Square Research analyst Todd Rethemeier:

Over the next few days, we suspect that investors will read many comments about how this won’t be THAT bad for AT&T. We would urge investors to consider the following math (all are estimates, since the company hasn’t reported 4Q results yet). In 2010, AT&T had 11.1 million postpaid gross adds, with 8.6 million disconnects, resulting in 2.5 million net adds. About 37% of those gross adds, or 4.1 million, were on the iPhone. Now, if we assume that AT&T loses 50% of the iPhone gross adds (i.e. AT&T and Verizon split the new iPhone sales evenly), this means that AT&T’s gross adds will drop by about 2.05 million (50% of the 4.1 million). So, AT&T’s overall postpaid gross adds are now 9.0 million (11.1 million less the 2.05 million). The disconnects of 8.6 million don’t change, and AT&T’s postpaid net adds are now 400k for the full year. And, this is only assuming that Verizon takes 50% share of the new iPhone sales – it doesn’t assume that any of AT&T’s existing customers cancel their contracts and switch to Verizon.

The truth is likely to be in the middle. Here’s the most likely scenario. When the Verizon iPhone launches there will be a few vocal—most likely tech bloggers—that will break AT&T contracts and go with Verizon. If Verizon’s network doesn’t stumble out of the gate it’ll be a bash AT&T festival.

Once that smoke clears, it’ll be business as usual. Simply put, inertia and two-year contracts take over. Here are five reasons why the sky won’t fall on AT&T.

  1. You’re locked in already. How about that $49.99 iPhone 3Gs? What about all those sweet iPhone 4 upgrades a year ago? Add it up and the majority of AT&T customers are already locked in for at least 18 months or so. You can bolt for Verizon, but it’s going to cost you. Most people—outside of San Francisco and New York City—aren’t going to break contracts.
  2. AT&T still has the iPhone. Remember, AT&T isn’t losing the iPhone. The wireless carrier is just losing exclusivity. A few AT&T customers will be poached by Verizon, but the exact amount is unknown. It’s quite possible that Verizon Wireless just adds to iPhone demand. There’s a lot of pent-up demand for the iPhone at Verizon, which can go for two years just selling upgrades to its existing customers.
  3. AT&T is already diversifying. If you paid any attention to AT&T at the Consumer Electronics Show you’d find a carrier that has fallen in love with Android. Why not? Motorola is also looking to diversify. AT&T has grabbed an impressive lineup of Android devices from Samsung, Motorola and HTC. Some of those Android devices will help offset any losses to Verizon over the Android.
  4. Inertia rules. Consumers can gripe about their carriers constantly, but few of them actually jump ship. Inertia dominates. Families with group plans, enterprises and consumers that have good coverage from AT&T will stay put.
  5. AT&T’s reputation may improve. The situation today looks like this: AT&T’s network can’t handle the iPhone in a few locations and the company gets crushed in the perception game. Losing exclusivity on the iPhone could actually help AT&T’s network. If iPhone fans head to Verizon, AT&T will have a chance to catch up to bandwidth demand. The other wild-card: Verizon has been downright cocky about its ability to handle the iPhone’s data demand. If Verizon stumbles, AT&T will look much better.

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Source: AT&T: Five Reasons the Sky Won't Fall When iPhone Goes to Verizon