Thursday, 21 April 2011 12:44

Verizon's Earnings Confirm The Economic Impact of Android vs iPhone In Regards To Carrier Profitability

Verizon inched past estimates, but actually turned lower subscriber growth than AT&T, despite getting the iPhone and AT&T losing the exclusive. Verizon's net gain of post paid subscribers was much larger than that of AT&T's (who aggressively pushed high end Android phones for the first time last quarter) - largely due to the introduction of the iPhone, but the economic advantage of the iPhone in regards to Verizon's business appears to have be significantly overestimated. As a result, AT&T is trading up on the news and Verizon is trading down.

This goes to vindicate my thesis that Google's killer "Less than free" business model is extremely difficult to compete with and is very, very profitable to those who have embraced it - which is now almost everyone. Remember, there is most likely more profit in an Android phone sold (due to Google's revenue sharing model) than there is an iPhone sold, and the iPhone probably engenders more expense to the carrier in terms of data network usage. It doesn't take a genius to determine where the focus of carrier marketing dollars will be focused in the upcoming quarters, not that this real time experiment has produced results.

As reported on

Verizon reported a profit Thursday that topped analyst estimates.

The telecommunications company said it earned 51 cents a share in the first quarter, compared with 16 cents a share in the same period last year.

Revenue edged up slightly to $26.99 billion, from $26.91 billion a year ago.

Equity analysts who follow Verizon had expected earnings of 50 cents on sales of $26.9 billion.

In the company's wireless business, the company added a net 1.8 million subscribers, including 906,000 retail post-paid customers. Earlier this week, rival wireless provider AT&T reported a 2.0 million net gain in wireless subscribers, including 62,000 retail post-paid subscribers.

Shares of the company, which closed regular Wednesday trade at $37.79 were last lower in pre-market trade.

It is very important to note that until reliance on carriers is broken, carriers pretty much make or break handsets due to their connection to the consumer through subsidization. Apple (and I'm sure Google as well) are working on breaking that reliance (as Google tried with the initial Nexus business model, and as Apple is allegedly developing a software SIM), but until then, carriers rule.  It should be quite obvious to most that carriers and vendors alike consider Android to be a goldmine.

See also:

Google’s Q1 2011 Review: Part 2 Of My Comments On The Gross Misvaluation of Googl

AT&T’s Q1 Record Results Show That There Is More Money In Android Than There Ever Was In Apple: How Do You Compete With Less Than Free?

Last modified on Thursday, 21 April 2011 12:44