The iPhone Is Taking Over Verizon

Once upon a time, Verizon (NYSE: VZ  ) was predominantly a Google Android carrier. Big Red's popular Droid marketing campaign was a quite successful in driving Android adoption, making the company one of Google's most important Android carrier partners. Some of the early Droid commercials even bashed Apple's (NASDAQ: AAPL  ) iPhone, prior to the company becoming an official iPhone carrier. These days, the iPhone is taking over Verizon.

The most iPhones we've ever activated
Verizon just announced its fourth-quarter results, and included in those figures was the tidbit that Verizon activated 6.2 million iPhones during the quarter. That represents 63% of the 9.8 million total smartphones the carrier activated, in line with its previous disclosure that smartphone activations during the quarter were driven by a "higher mix of Apple smartphones."

More importantly, this is the first time that the iPhone has comprised the majority of smartphone activations at Verizon, topping the important 50% threshold.


Q3 2012

Q4 2012

Total smartphone activations

6.8 million

9.8 million

iPhone activations

3.1 million

6.2 million

iPhone percentage of total



Source: Conference calls.

That's a big sequential boost in the iPhone's percentage of total smartphones, thanks in part to the launch of the iPhone 5. Verizon said roughly half of those were the newest LTE-equipped iPhone 5, which shows that older models are still selling well at lower price points.

This is the most iPhones that Verizon has ever activated by a healthy margin. The prior record was Q4 2011 when Big Red activated 4.3 million iPhones.

Domestic digits
Rival AT&T (NYSE: T  ) has yet to report official earnings figures, which are due on Thursday. However, Ma Bell did already tell investors that it activated 10.2 million smartphones during the fourth quarter, including the "best-ever quarterly sales of Android and Apple smartphones." Its prior iPhone record was 7.6 million, so that means that Apple has sold at least 13.8 million iPhones between AT&T and Verizon during the fourth quarter.

It's also quite possible that AT&T, which has always been predominantly an iPhone carrier, also saw a big sequential jump in the iPhone's percentage of total smartphone activations. If it reached 80% like it did during Q4 2011, then that would represent close to 8.2 million iPhone activations.

Taking it a step further, let's give Sprint Nextel the benefit of the doubt and say it sold roughly 2 million iPhones in the fourth quarter, slightly higher than the record 1.8 million units that it activated a year ago. That could bring Apple's domestic total up to around 16.4 million iPhones.

Some numbers games
There are a few ways we can parse this data.

If we look at Verizon's typical contribution to total iPhone units, Big Red has averaged 11% of total iPhone units ever since first getting the device seven quarters ago. That's the method that Topeka Capital analyst Brian White is using to suggest that Apple could have sold up to 56 million iPhones during the fourth quarter -- a healthy beat relative to the roughly 50 million that the Street is expecting.

On the other hand, if we look at the estimated domestic total of approximately 16.4 million iPhones and the fact that international unit sales typically account for two-thirds of iPhone units, we come up with nearly 50 million iPhones. However, if we use an estimated mix of 70% international units, which Apple has achieved numerous times before, that total climbs to 55 million.

A higher international mix is also likely since the newest model has seen the fastest iPhone rollout ever. Apple reached over 100 countries by the end of 2012, making good on its promise to make the new device available on 240 carriers by year's end -- the vast majority of its roughly 250 carrier partners around the world.

Any way you slice it, Apple looks to have sold between 50 million and 55 million iPhones during the fourth quarter.

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