Verizon promises smooth iPhone launch
NEW YORK (AP) - Verizon Communications Inc. vowed Tuesday not to mess up its iPhone launch next month.
It’s a bold boast, considering how problematic the iPhone has been for its exclusive U.S. carrier so far, AT&T Inc. The iPhone 3G launch in 2008 was accompanied by a server meltdown, which left people unable to use their phones for as long as a day. The phone later overloaded AT&T’s network in many areas.
Verizon believes it has learned from AT&T’s mistakes since its first iPhone in 2007. Through last year, Verizon added capacity to its network with the iPhone in mind.
“We’re not going to have any flaws on the execution of the iPhone launch,” Chief Financial Officer Fran Shammo told Wall Street analysts on Tuesday.
Verizon announced two weeks ago that it would start selling Apple Inc.’s iPhone on Feb. 10. AT&T’s exclusive hold on the phone has left Verizon behind in attracting smart-phone subscribers, but it now hopes to catch up.
However, the company doesn’t have a good idea of how many iPhones it might sell. Refusing to give a projection, Shammo would only acknowledge that the average analyst forecast is for 11 million units this year, roughly the same amount AT&T sold in the first nine months of last year. Analyst projections vary from 5 million to 13 million.
Verizon Chief Operating Officer Lowell McAdam confirmed on the sidelines of the meeting that the company’s standard $30-per-month unlimited data plan will be available for the iPhone. AT&T abolished its unlimited data plan for new customers last summer, ahead of the launch of the iPhone 4 in June.
“That’s a competitive advantage for us right now,” McAdam said.
However, the offer won’t last: McAdam reiterated that the company is going to switch to plans with a monthly data allotment soon.
A $15-per-month limited data plan the company tried out over the holidays for other smart phones won’t be available for the iPhone. That plan is being phased out at the end of the month, executives said.
Verizon is also tightening some of its policies ahead of the launch. It’s abolishing its “New Every Two” program, which has given existing customers additional discounts of up to $100 on new phones. Current customers will get the discount one last time. Verizon is also reducing its return period for phones to 14 days, from 30.
Analysts had been assuming that Verizon would take a hit to its earnings this year because it will subsidize each new iPhone by about $400 to bring the purchase price down to $200 to $300. On Tuesday, the company indicated that the drag on earnings would be smaller than expected, if iPhone sales come in around 11 million. It projected earnings of $2.18 to $2.25 per share for 2011, excluding unusual items. Analysts polled by FactSet on average expected earnings of $2.19.
Verizon shares rose 65 cents, or 1.8 percent, to $35.89 in midday trading Tuesday. The shares hit a multi-year high of $37.70 in early January as investors grew excited about the prospect of a Verizon iPhone.
Verizon also reported fourth-quarter results Tuesday, revealing that its wireless arm did well even without help from the iPhone.
Verizon Wireless added 872,000 subscribers on contract-based plans, well above analyst expectations of about 650,000. Contract-based subscribers are the most lucrative, and Verizon said three-quarters of the new subscribers bought smart phones, which come with added data fees.