Phone
As time ticks down on the biggest U.S. phone companys exclusive rights to carry the Apple Inc. device, it is looking beyond mobile phones for growth. The companys next bet may be a camera, electronic-book reader or dog-tracking collar, executives of its wireless unit said in interviews last week.
“Its not just looking for the next great smart phone, its looking for what are the next great set of devices that customers are going to want,” Ralph de la Vega, head of the wireless unit, said at AT&Ts offices in Atlanta. “Theres a plethora of those things that are just beginning to get to market that I think will dramatically change the industry.”
AT&T added about 840,000 iPhone customers last quarter, accounting for 60 percent of subscriber gains. That helped drive up its wireless sales 10 percent in a slumping economy. AT&Ts exclusive iPhone deal may end as soon as 2011, said Rick Franklin, an analyst at Edward Jones & Co. in St. Louis.
Rivals such as Verizon Wireless gaining access to the phone could hurt AT&Ts growth, forcing it to look at new devices to keep its advantage.
“For better or for worse, AT&T has become remarkably dependent on the iPhone,” said Craig Moffett, an analyst at Sanford C. Bernstein & Co. in New York. “They have to be thinking at this point ways that they can capture more than their fair share of the only part of the market thats growing, and thats wireless data.”
Nascent Market
More devices that pair consumer electronics with AT&Ts wireless network will begin to appear next year, said de la Vega, 57. AT&T, based in Dallas, announced a deal with Plastic Logic Ltd. last month to roll out an electronic reader in 2010 that will compete with Amazon.com Inc.s Kindle.
There are as many as 2 million gadgets such as e-books, security devices and utility meters connected to wireless networks in the U.S., said Roger Entner, an analyst at Nielsen Co. in Boston. The market, which generates less than $100 million in annual revenue today, will grow as much as 100 percent a year, he said.
“Theres no question that theres a real business here,” said Moffett. “The question is, just how big is it going to be?”
AT&T introduced the iPhone two years ago. While AT&T and Cupertino, California-based Apple declined to comment on their contracts length, the companies deal may let AT&T keep exclusivity until so-called fourth-generation networks become widely available in 2011, said Franklin at Edward Jones.
Verizon Competition
Should Verizon get access to the iPhone, it could win over some customers from AT&T because of its reputation for network quality, said John Hodulik, an analyst at UBS Securities LLC in New York. He recommends buying AT&T shares and doesnt own them.
AT&T fell 13 cents to $25.49 on the New York Stock Exchange at 1:57 p.m. and had lost 10 percent this year before today. Verizon Communications Inc., which co-owns Verizon Wireless with Vodafone Group Plc, declined 23 cents to $30.85 and had dropped 8.3 percent this year.
Dog Collar
The executive in charge of the iPhone at AT&T, Glenn Lurie, is also in charge of finding new wireless products. Last year, the company started looking for “the next big bet” that would follow the iPhone, Lurie said. The push into unproven markets is a risk that AT&T learned to take in its dealings with Apple, he said. The iPhone helped create a new category of phones, doing away with a physical keyboard and having a larger touch display.
“Were placing some bets on some new business models,” said Lurie, 43. “Were doing all that ahead of the fact that weve launched some of these products. Were taking a page out of what we learned from Apple and about ourselves from the Apple deal.”
Lurie said the new products could include positioning devices such as a signal-transmitting dog collar that would allow the owner to track the animal if it runs away or is stolen. Lurie declined to say what products his group is working on or how many employees it has.
The industry needs new revenue streams as the U.S. mobile- phone market nears saturation. Almost nine out of 10 U.S. residents had a wireless device at the end of last year, according to the CTIA wireless-industry association.