Update: Verizon expects to sell 11M iPhones in 2011

Wireless customers top 94M in Q4

Verizon Wireless increased subscribers to 94.1 million in the fourth quarter, up from 93.2 million in the third quarter, a small increase that shows how saturated the U.S. wireless market has become even for the top wireless player.

The iPhone coming to Verizon on Feb. 10 could improve that picture decidedly, and a Verizon spokesman said Tuesday that the company expects to sell 11 million iPhones in 2011. Still, Verizon isn't issuing an official forecast for how much the iPhone will affect its subscriber base, and it's clear that sales of some its other devices could be reduced. The carrier's parent, Verizon Communications, announced fourth-quarter results earlier Tuesday for its wireless and other divisions.

Verizon officials also told analysts Tuesday that Verizon Communications overall revenue, including wireless, is estimated to increase 4% to 8% in 2011, with a forecast of earnings per share growth of 5% to 8% in 2011, "assuming we sell 11 million iPhones," the spokesman said.

AT&T, which will announce its fourth-quarter results Thursday, had 92.8 million subscribers at the end of the third quarter. Some analysts believe AT&T will surge ahead of Verizon Wireless subscriber totals for the fourth quarter, but then fall behind again once Verizon Wireless starts sellig the iPhone.

The fallout from AT&T iPhone users switching to Verizon could be 10% to 20%, analysts said, but it will take months for some AT&T subscribers on contracts to switch over. The latest ChangeWave survey of 4,000 U.S consumers said 26% of iPhone customers would leave AT&T for Verizon, citing dropped calls and poor reception with AT&T's network.

Verizon on Friday launched a TV ad that builds on the drama of its Feb. 10 iPhone launch and serves as an indication of how important the device will be to the carrier.

Apple began airing its own iPhone TV ad over the weekend that shows two iPhones side-by-side with the Blue Danube waltz as the background music. It concludes with the words, "Two is better than one," referring to having both Verizon Wireless and AT&T carrying the iPhone. See the YouTube video.

Verizon said its increase of 872,000 contract wireless customers in the fourth quarter came largely from new smartphones running Google's Android operating system. That number was ahead of most analyst estimates, which were in the range of 600,000 added contracts.

Generally, analysts believe the long-term picture for customer gains of more than 1 million a quarter at AT&T and Verizon is limited by market saturation where those two carriers alone command nearly 200 million customers. In some countries, customers own multiple wireless devices each.

In the U.S., to some extent, the major carriers are hoping interest in tablet computers, such as the iPad and the Galaxy Tab, will allow continued expansion of the wireless customer base. That expansion could come when a a smartphone customer, for example, adds a tablet computer on a second wireless contract or purchases plenty of data usage each month on a no-contract basis.

Some early adopters and tech-savvy customers are willing to spend thousands of dollars annually for data, text and voice over wireless. However, the carriers also recognize that a much larger group of customers will spend more conservatively.

As a result of the market pressures, analysts are carefully watching what impact the iPhone will have at Verizon.

Philip Redman, an analyst at Gartner, said Verizon Wireless' new customer growth was "respectable," but added, "there's no doubt that the high penetration of the U.S. market means slowed subscriber additions." He said Verizon and AT&T seem to be pulling ahead of the pack of other national and regional carriers.

"It is going to get harder to support four [national] wireless providers going forward," Redman said, referring to third and fourth place carriers Sprint Nextel and T-Mobile USA as well.

Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at @matthamblen or subscribe to Matt's RSS feed. His e-mail address is mhamblen@computerworld.com.

Copyright © 2011 IDG Communications, Inc.

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