iPhone 5: Wireless carrier winners and losers

Mike Dano

Apple (NASDAQ:AAPL) took the wraps off its new iPhone 5, and in doing so offered precious few surprises. AT&T Mobility (NYSE:T), Verizon Wireless (NYSE:VZ) and Sprint Nextel (NYSE:S) will sell the taller, LTE-capable gadget, and T-Mobile will not.

If analyst forecasts are to be believed, the iPhone 5 will sell in enormous volumes in the weeks after its release Sept. 21. Some expect Apple to sell as many as 10 million iPhone 5s in the first few days after the device goes on sale, which would make it the world's biggest phone launch.

Thus, it's worth evaluating exactly how the iPhone will affect each of the nation's major and minor carriers.

iPhone 5

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T-Mobile USA is the most obvious loser in Apple's iPhone 5 launch. The carrier was conspicuously absent from Apple's iPhone 5 launch plans--a situation that T-Mobile has clearly been planning for. In the past few months, T-Mobile has announced it will provide HSPA speeds to unlocked iPhones by year-end via a costly spectrum-refarming program; that its new unlimited smartphone data plan will be available to unlocked iPhones; and that it is embarking on a training program aimed at helping retail employees sell T-Mobile services to owners of unlocked iPhones.

As a result, T-Mobile can offer iPhone owners service plans that it says are up to $50 per month cheaper than what AT&T Mobility offers, with similar network speeds. The caveat, though, is that users will have to either pay hundreds of dollars to cancel their AT&T contracts or pay even more to purchase an unlocked, unsubsidized iPhone. Further, T-Mobile does not offer LTE.

But T-Mobile has reason to hope. According to surveys from comScore, there are roughly 37 million iPhone owners in the United States, and, according to T-Mobile, about 1 million of those users are on its slower EDGE data network. If T-Mobile has been able to capture roughly 2.7 percent of the iPhone market without almost any effort, its latest strategy might at least slow the rate of its iPhone-related defections.

Smaller wireless carriers are another key group that could suffer from the launch of Apple's iPhone 5. Although it's not yet clear exactly which small carriers will sell the iPhone 5, announcements have trickled in from Cellcom, C Spire Wireless and Leap Wireless (NASDAQ:LEAP) that they will launch the device Sept. 28, a week after the Tier 1 carriers.

But, even though some small carriers are planning to sell the iPhone 5, it's unlikely they will be able to fully support the gadget's LTE capabilities. Smaller carriers survive largely due to roaming agreements with the nation's larger wireless carriers--but so far the LTE roaming situation remains clouded by technological, business and regulatory complexities. And while some small carriers like C Spire and Leap have recently begun building their own LTE networks, iPhone 5 shoppers may prefer to purchase their devices from carriers with larger and more established LTE networks.

Also, it's worth noting that the new iPhone creates a further split between Sprint and its WiMAX partner Clearwire (NASDAQ:CLWR). Much of Clearwire's wholesale customer additions were due to sales of Sprint's CDMA/WiMAX smartphones. But as Sprint pushes its growing range of LTE smartphones--which now includes the iPhone 5--it's reasonable to assume that Clearwire will continue to report slowing customer additions.

On the reverse side, the carriers that will benefit the most from Apple's iPhone 5 launch are--obviously--those that will sell it. But it's unclear exactly how that scenario will play out.

For its part, Verizon Wireless commands the nation's largest--and, according to RootMetrics, the speediest--LTE network. Indeed, Verizon Communications EVP and CFO Fran Shammo recently pointed out that Verizon has "double the LTE coverage of all its competitors combined," which he said will give the carrier an advantage in terms of iPhone 5 sales. "We are in a good spot. Apple is a good partner, and I think we will do extremely well with the phone," Shammo said.

Verizon also said FaceTime calls over cellular can be used with any of its plans, not just its shared data plans, a move that could set Verizon apart from AT&T.

Sprint, for its part, maintains that its unlimited data service will set it apart from the pack. "Whether it's finding a nearby restaurant with Siri, using Passbook to get organized or surfing the Web, Sprint's truly unlimited data plans provide incredible value for iPhone customers, meaning customers can make the most of iOS 6 without worrying about costly overages on their monthly bill," proclaimed Sprint CEO Dan Hesse in a release.

As for AT&T, the carrier continues to ring up more iPhone activations than either Sprint or Verizon, a situation that could be due to the carrier's established position as the country's first iPhone carrier as well as its relatively speedy HSPA network.

For the iPhone 5, AT&T might argue that the combination of its HSPA and LTE network will result in a better experience. The carrier could also point out that its version of the iPhone 5 will be the only one that can work on the LTE networks in Canada (for whatever that's worth). But between Verizon's LTE network and Sprint's unlimited data offering (and AT&T's plan to charge for FaceTime calls), AT&T could be the iPhone 5 carrier without a compelling sales argument.

To be clear, the iPhone is not an immediate gold mine for wireless carriers. The initial expense of purchasing iPhones from Apple and then subsidizing the cost of those phones for users often eats into carriers' margins, at least in the first quarter after a new version of the device goes on sale. But that brief dip is typically smoothed out as customers settle into their two-year contracts and carriers reap their monthly service payments.

P.S. For complete coverage of the iPhone 5 launch and the market's reaction, make sure to check out our special report page: Apple's iPhone 5: Complete coverage +Mike Dano

Article updated Sept. 13 with additional information.