AT&T, Verizon embrace Windows Phone to balance smartphone battle

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Recently, AT&T Mobility (NYSE:T) and Verizon Wireless (NYSE:VZ) have been more open in their embrace of Microsoft's (NASDAQ:MSFT) Windows Phone platform, and the likely reason why is that they are looking for a way to balance against the two dominant smartphone platforms: Google's (NASDAQ:GOOG) Android and Apple's (NASDAQ:AAPL) iOS.

Click here for U.S. market share figures for iOS, Android, Windows Phone and more.

The idea of carriers hedging their bets is not new, and both carriers have said in the past they wanted a strong third smartphone ecosystem. Yet their embrace of Windows Phone, while Research In Motion's (NASDAQ:RIMM) BlackBerry 10 is still being developed, has become more prominent.

AT&T, most obviously, is throwing its marketing muscle behind Nokia's (NYSE:NOK) flagship Lumia 900, arguably the most important Windows Phone device released to date, in large part because of Microsoft's strategic partnership with Nokia. The reception has been positive, though Nokia and AT&T have not released exact sales figures. Nokia spokes Keith Nowak said "demand for the Nokia Lumia 900 has been such that, while the Lumia 900 can still be found at some locations, we have also seen reports of stock outs at locations (and online channels) across the country--despite regular shipments to restock stores. We are building and shipping devices constantly--so stores are receiving more units to fulfill demand on a regular basis."

Meanwhile, Verizon Communications CFO Fran Shammo said last week that the nation's largest wireless carrier is "hoping to do the same thing" with Windows Phone that it did with Android, which now powers more than half of all smartphones across the United States.

"It is important that there is a third ecosystem brought into the mix here," Shammo said on the company's first-quarter earnings conference call. "We are fully supportive of that with Microsoft ... We helped create the Android platform from the beginning and it is an incredible platform today, and we are looking to do the same thing with a third ecosystem." Shammo also said that Verizon is looking to the Windows Phone 8.0 software upgrade, expected later this year, before committing more fully to the platform.

Why the sudden embrace of Windows Phone? According to comScore, for the three months ending in February, Microsoft's U.S. smartphone market share stood at 3.9 percent--relatively unchanged compared with previous months. One answer is that the carriers are wary of further dominance by Apple, which already affects carriers' balance sheets because of the high subsidies they pay to Apple for the iPhone. "There clearly is a danger now that iPhone is going to get a stranglehold of the U.S. smartphone market, and I don't think operators are crazy about that," Tero Kuittinen, a mobile analyst and vice president of Alekstra, told the New York Times.

Another reason is that although Android is currently dominated by Samsung, there is the continued worry of what Google will do with Motorola Mobility (NYSE:MMI) once the company's acquisition of Motorola closes. The major fear is that Google will use Motorola to build hardware and become a more vertically integrated company like Apple. In that sense, hedging with Microsoft could make sense for carriers looking to a viable third option.

For more:
- see this NYT blog post
- see this WSJ article (sub. req.)
- see this Read Write Web article

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