Is Apple Due to Collect a Verizon Payout?
Verizon (NYSE:VZ) would really appreciate it if you bought your next iPhone from them. This is because the wireless carrier may be on the hook for up to $14 billion in iPhone purchase commitments this year if it doesn’t sell enough of the product, according to Moffett Research LLC, reports Bloomberg.
Analyst Craig Moffett notes that Verizon has a multiyear contract with Apple (NASDAQ:AAPL) that requires the carrier to purchase $23.5 billion worth of iPhones in 2013. According to Moffett, this is more than double the amount of iPhones that Verizon was able to sell last year. This may potentially leave Verizon with an iPhone bill of approximately $12 billion to $14 billion.
The analyst believes that Verizon may not be the only carrier that will soon be hurting from an overall slowdown in iPhone sales. Apple typically imposes iPhone sales quotas on carriers of the iPhone and some carriers, like Verizon, may fall short of those quotas this year.
“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 said to Bloomberg. ”It is therefore unrealistic to think that Apple won’t extract some consideration for renegotiating these shortfalls.”
Apple’s stringent iPhone carrier conditions may be one reason why some telecommunications companies still have not embraced the iPhone. China Mobile (NYSE:CHL), the world’s largest carrier with more than 700 million subscribers in the greater China market, is one notable holdout. NTT DoCoMo, Japan’s largest wireless carrier with more than 60 million subscribers, reportedly refused a deal with Apple because the Cupertino-based company was demanding that its iPhones make up half of the carrier’s handset sales.
But there are also carriers that seem to be selling a fair amount of iPhones even as the high-end smartphone market slows down. Sprint (NYSE:S) is one carrier that is expected to meet its $15.5-billion iPhone obligation over the next four years.
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