AT&T is banking on the iPhone as the ticket to saving its rocky switch from Cingular to AT&T, according to observers of the provider's latest investment gathering. Analysts from UBS Investment Research have noted that AT&T blames at least some of its poor results for the opening quarter of 2007 on the awkwardness of the change in name, which has many users still assuming the Cingular title. The Apple device is seen by AT&T as a "branding event" that will cement the name in people's minds, says UBS. Contributing to the issue has been a reluctance to brand phones with the new label. The carrier has so far continued to label even higher-profile phones with its new name, showing some phones such as the LG CU500v with AT&T branding while releasing them as Cingular devices.
Also gleaned from the meeting is the belief that initial announcements by Apple and AT&T on the lack of subsidies are correct: the iPhone isn't likely to be discounted by AT&T and may even turn a small profit for the company at retail, the report notes. Apple's portion of the sale, however, might actually hurt AT&T with existing subscribers since most of the profit would only come from service plans for new users.
Though full details of the contract between AT&T and Apple remain a secret, UBS believes such terms could create a genuine problem for the former unless the profit-taking changes for customers trading up versus new subscribers. The deal might also have some built-in flexibility that could alter profit based on the split between new and old subscribers.
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