Report: Verizon may owe Apple $14B for slower-than-expected iPhone sales

Verizon Wireless (NYSE:VZ) may owe Apple (NASDAQ:AAPL) as much as $14 billion in purchase commitments if it doesn't sell the agreed number of iPhones this year. In a Bloomberg report citing Moffett Research, which analyzed SEC filings, Verizon inked a deal with Apple in 2012 in which it was obligated to purchase $23.5 billion worth of iPhones in 2013 alone. That is double the number of iPhones that Verizon sold in 2012.

If Verizon doesn't sell that many iPhones this year, Craig Moffett of Moffett Research estimates the company could be on the hook to Apple for as much as $14 billion in purchase commitments. 

In the first quarter, Verizon activated 4 million iPhones, half of which were the LTE-capable iPhone 5.  Moffett suggests that demand for the iPhone has been sluggish for several operators and he believes that other wireless providers may also be experiencing iPhone sales deficits.

Verizon isn't the only U.S. operator with sales commitments to Apple. Cricket provider Leap Wireless (NASDAQ:LEAP) said it committed $900 million over three years to sell Apple's iPhone. In addition, Sprint has a four-year, $15.5 billion commitment to Apple.

Moffett added that Apple will likely act upon this commitment because it has similar commitments with other operators around the world and would not want to set a precedent. "It is likely that Apple would be reluctant to simply ignore these commitments, since many other carriers around the world are probably in a similar situation, and a simple amnesty would set an unwanted precedent," Moffett wrote. "It is therefore unrealistic to think that Apple won't extract some consideration for renegotiating these shortfalls."

Neither Apple nor Verizon Wireless spokespeople would comment on the Moffett report.

For more:
- see this Bloomberg article
- see this Los Angeles Times article

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