AT&T's exclusive deal to carry the iPhone has been a boon for the company's mobile arm. But the deal ends next year, leaving Ma Bell scrambling to renew it until 2011, in hopes that Apple's next killer products can keep AT&T on a rising tide.
According to The Wall Street Journal, the play for Apple is part of a grand redesign of the ancient telecom company, architected by the company's sophomore CEO, Randall Stephenson. Stephenson is trying to make Dallas-based AT&T into a wireless provider with a land-communications division; right now, it's the other way around. His company has spent almost $19 billion buying new radio spectrum and gobbling up wireless competitors to that end, in addition to the $1.3 billion it's spent discounting the iPhone for subscribers.
Keeping the iPhone could be integral to AT&T's continued growth amid recession. The company says it added about 4.3 million new iPhone subscrbers in Q3 and Q4 of 2008—almost half of whom weren't previously contracted with AT&T.
Being an AT&T-only hardware maker isn't working out as fortuitously for Apple. AT&T's network is prone to outages and is known to be one of the worst offenders in the dropped-call rankings. Its service plans are more expensive than T-Mobile, its 3G speeds are less consistent than Sprint, and its customer service is ranked as inferior to Verizon's. If Apple decides to offer the iPhone to T-Mobile, the other GSM carrier in the U.S., it'll be understandable—but who knows how the Google Android folks would react.