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4/16/09

With Sprint's Palm Pre on the way, AT&T seeks longer hold on Apple iPhone

AT&T's CEO knows he has a powerful source of Kryptonite that is withering his rivals.
And he doesn't want to give it up.
Rather than a shiny rock, the foe-weakening Kryptonite possessed by Randall Stephenson, AT&T's CEO, is the exclusive U.S. rights to sell Apple's iPhone.

"Because the deal has given it a big advantage over most domestic rivals, the company wants to prevent them from getting access to the device," Marketwatch reported. "In the second half of 2008 alone, AT&T activated 4.3 million iPhone accounts"

The Wall Street Journal is reporting this week that AT&T's exclusive deal with Apple expires next year, "according to people familiar with the matter, and Mr. Stephenson is now in discussions with Apple Inc. to get an extension until 2011."

It's part of AT&T's strategy to cope with a deteriorating landline phone business. Stephenson increasingly is turning his company's future hopes and focus on wireless.

"The next step, he said, is to do away with a requirement that customers have AT&T's home-phone service to qualify for discounts on TV or broadband Internet services. Being a wireless customer should be enough, he said," the Journal wrote. "We have 77 million wireless customers and 30 million consumer phone lines," Mr. Stephenson said in a recent interview at AT&T's headquarters in Dallas, where he moved the company last summer. "Which customer base would you rather work from? We tend to come at this backwards."

Whether AT&T keeps its exclusive U.S. rights to the iPhone for another year or two or more, Sprint CEO Dan Hesse is devising plans to unleash a powerful force of his own. The highly anticipated - or, in Sprint's view, the "most-anticipated wireless product of the year" -- and lauded Palm Pre is on the way to counter the Apple iPhone.

Sprint has yet to say specifically when it will begin selling the new phone, though CNET scribes are hearing talk it could be in mid May.

"The Palm Pre and Palm Web OS aren't necessarily going to revolutionize the smartphone market, in that it doesn't offer any crazy, new features, but it definitely brings a fresh look into the way you interact with a device and how it organizes information. It also brings innovation and life back to the struggling company and has certainly set the tech world abuzz," CNET states.

The BoyGenius Report said Sprint is readying its employees to "hawk the savior phone as soon as it drops" and that is likely to be before June.

"We were thoroughly impressed with the Pre at CTIA and it if it wasn’t ready for its public debut at that point, it was certainly close. Palm is seemingly putting all of its eggs into one basket for the time being however, so it’s no wonder the company is taking every precaution and ironing out as many wrinkles as possible before units start moving," stated the Boy Genius Report.

The Pre could become even more important to Sprint if other talk comes true that Apple is readying a dazzling third generation of the iPhone. The industry-changing device will have been on the market for two years when the summer arrives. That is the length of time for the two-year contracts of the early iPhone purchases to start expiring.

It could be a perfect time for rivals such as Sprint to attempt wooing them away if they have a device worth a strong look.

Moconews found the idea intriguing that AT&T might maintain its hold on the iPhone even longer.

"If the extension is granted, AT&T’s grip on the iPhone would span a total of four years—the equivalent of an eternity in the wireless world," Moconews wrote. "At that duration, it is easy to argue that it’s bad for the consumer, Apple, and maybe even AT&T. For consumers, it limits their choice of carriers. Already, people already go to great lengths to unlock the devices. For Apple, it could spell trouble because an easy way to sell more devices is by selling to consumers who are reluctant to switch to AT&T. But perhaps an even better question is: what more could AT&T offer Apple to fairly compensate it for that potential loss in revenues from other carriers? If you remember, the exclusivity was justified in the beginning because AT&T was taking a risk on Apple’s first mobile phone (even though that seems hard to believe now)."

But, as Apple Insider reports, new high-end iPhones, possibly with video-recording capabilities, indeed are on the way.

"'Our checks confirm that two versions of iPhones will be introduced this year,' Lazard Capital Markets semiconductors analyst Daniel Amir wrote in the opening paragraph of the report. 'Production of the new phones should start at the beginning of April and will ramp in May,'" Apple Insider wrote.

So in the coming weeks, with Sprint wielding its Palm Pre and AT&T wielding new Apple iPhones, we could see an escalation of the competitive skirmishes between two of the wireless industry's largest superpowers. Will it be as intense as the conflicts between Superman and Lex Luthor? Or even more explosive?

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