AT&T's mixed iPhone message

During AT&T's third-quarter earnings call yesterday, AT&T Mobility and Consumer Markets President and CEO Ralph de la Vega first trumpeted the company's third-quarter iPhone activations (3.2 million, the highest number ever) and then downplayed the company's reliance on the iPhone by saying that the iPhone was just one part of the firm's smartphone portfolio. This mixed message from de la Vega exemplifies AT&T's tenuous relationship with Apple--on one hand the carrier has benefited greatly from its exclusive Apple relationship, but on the other hand it has suffered tremendously from the network constraints that iPhone users' demand for data has generated.

But that love/hate relationship between AT&T and Apple may soon be over. De la Vega implied that the carrier's exclusive deal with Apple to carry the iPhone in the U.S. could end. When asked about the exclusive relationship, de la Vega didn't provide any specifics, but he did say that if AT&T loses that exclusivity it will still offer a better iPhone 3GS than potential competitors because the device runs on the company's HSPA 7.2 network. "The iPhone will work better on our network than on anyone else's network," he said.

AT&T is in the midst of upgrading its network to HSPA 7.2, and de la Vega said in yesterday's call that AT&T will only have six markets deployed in the fourth quarter of 2009 and only 25 markets deployed by the second quarter of next year. If the iPhone exclusivity deal is ending soon, I doubt that the company's HSPA network will be widely deployed enough to convince iPhone fans that AT&T offers a better option than other network operators, particularly Verizon Wireless. 

But it's not clear that Verizon will be launching the iPhone. Although it was rumored to be in discussions with Apple, there has been no confirmation of a deal. And with Verizon's recent ad campaign for the Droid device, which openly mocks the iPhone by telling consumers "iDon't have a real keyboard," and "iDon't run simultaneous apps," and adds that, "everything iDon't, DroidDoes," it seems unlikely that Verizon will be launching an iPhone any time soon.

Nevertheless, if AT&T doesn't already have a post-iPhone strategy, it better come up with one fast. Judging from de la Vega's comments, the company is putting a lot of faith in its new emerging devices division, which has secured several promising deals with ereaders such as the Barnes & Noble Nook and Amazon's international version of the Kindle. But it's going to take a lot of connected devices to make up for potential losses that the company may face if another U.S. operator launches an iPhone. -- Sue