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Apr. 16, 2009

According to unnamed sources at The Wall Street Journal, AT&T’s contract agreement with Apple to be the exclusive retailer in the U.S. for the iPhone ends in 2010, and company CEO Randall Stephenson is pushing the envelope to get the contract extended for at least an additional year.

AT&T still remains tight-lipped about its exclusive contract with Apple.

According to The Wall Street Journal, “it’s a multi-year relationship and we haven’t gotten specific beyond that,” said AT&T spokesman Mark Siegel. For its part, Apple didn't reply to requests for comment by press time.

In Q3 2008, the iPhone single-handedly spurred the largest net gain in postpaid wireless subscribers in AT&T’s history. Over 4.28 million iPhone 3G smartphones were activated in the second half of last year, with about 40 percent of those customers new to AT&T.

What's more, iPhone customers are high-value subscribers with a significantly higher ARPU (average revenue per user) and lower cancellation rates than the average postpaid customer.

Maintaining its exclusivity in the U.S. is strategically important for the second largest wireless carrier.

Telecom analyst Jeff Kagan says “Apple's iPhone has now proven to be a really big success and AT&T would be crazy not to want to keep its exclusivity as long as they possibly can.”

AT&T, like many other telecom carriers and mobile phone companies, is largely dependent on growth in its wireless segment to help offset what is now called in the industry "landline defections".

AT&T has about 76.9 million wireless customers in the U.S., compared to 29.9 million land lines. “The wireless part of AT&T is the growth engine, and thanks to the iPhone, now with TV and broadband,” Kagan added.

If AT&T loses its foothold on the iPhone, the device could be carried on rival networks and would unseat the company’s position as its sole carrier.

Number One's Verizon Wireless initially passed on the iPhone deal, but could have access to the device if AT&T’s contract with Apple is not renewed for some reason.

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Source: The Wall Street Journal.