Analyst Commentary

Today we focus on two developments:

• AT&T's Unlocked iPhones: AT&T has announced it will allow out-of-contract iPhones to be unlocked, allowing users to choose a different provider at home or abroad for their device. This is the first time the carrier has allowed such a move, five years after it first launched the smartphone. AT&T has also announced that an affiliate of Cerberus has agreed to acquire AT&T Advertising Solutions and AT&T Interactive. As part of the transaction, AT&T will receive a 47% equity interest in the new entity, YP Holdings LLC, which includes the Yellow Pages directory
• T-Mobile/Leap Spectrum Swap: T-Mobile and Leap have agreed to a spectrum swap in different US markets, either between themselves or between some of their joint ventures. Around 10 MHz of AWS spectrum will be exchanged pending regulatory approval. T-Mobile will receive spectrum from Leap in several markets in Alabama, Illinois, Missouri and Minnesota, and Leap will receive spectrum from T-Mobile in Arizona and Texas. Additionally, the companies will exchange spectrum in Pennsylvania, Delaware, Texas and New Mexico.

Our Take

Five years after launch, AT&T is finally allowing its iPhone users to unlock their devices once they are out-of-contract, a move that may surprise European readers as this is common practice on the continent. The move will help roaming customers as they will now be allowed to use a domestic SIM card once they're abroad, but, more specifically, it will help US GSM carriers that do not currently sell Apple devices. The largest of these operators, T-Mobile, has already stated that over 1 million unlocked iPhones are present on its network and will attempt to attract even more of these customers with enticing SIM-only offers.

More and more smaller carriers in the US are offering the device, but it tends to be CDMA-based players that take advantage of Verizon's version of the iPhone, and while competition is getting stronger in the US iPhone market, recent moves should not change the pattern of AT&T and Verizon gaining the lion's share of sales, having sold 28.3 million iPhones between them in 2011.

The other interesting aspect of the move is T-Mobile's renewed rivalry with AT&T since the failure of their merger, with the German subsidiary clearly targeting its once partner and using some of the USD4-billion break-up fee to do so. The carrier wants to position itself as the main value proposition in the market. Part of its strategy is also to launch LTE services and to improve its HSPA+ network, which should be boosted by the recent swap announcement with Leap Wireless.