Morgan Stanley analyst Kathryn Huberty isn’t exactly spot on when it comes to anticipating Apple earnings, but she raises a good point in a recent note to investors where she lays out a case that Apple could very well double the iPhone’s marketshare by opening up distribution to a number of carriers.
No matter how much people are enamored with the iPhone, not all mobile carriers are created equal and some customers would much rather stick with a carrier they like than switch to a carrier that’s been plagued with connectivity issues (ahem, AT&T). Also, some users are stuck in family plans on non-iPhone networks, and as has been pointed out before, many consumers start off with the carrier of their choice, and then work downwards from there. That being the case, there’s only so much room for Apple to grow under its current business model, and Huberty that Apple could easily double its iPhone marketshare once it universally abandons its reliance on exclusive carrier distribution agreements.
In the top six iPhone markets that are still exclusive, we believe that Apple’s market share could rise to 10%, on average, in a multiple carrier distribution model from 4% today. These six markets represented almost 70% percent of iPhone shipments in C2Q09.
As an example, Huberty speculates that if the iPhone becomes on another network here in the US, such as Verizon, it would boost iPhone marketshare to over 12%. The iPhone’s current share of the cell phone market hovers at around 5%.
The iPhone is an expensive device, and AT&T, and other carriers, pay Apple a hefty subsidy on each iPhone sold in exchange for the exclusive right to carry the device. Naturally, should Apple end its exclusive partnership with AT&T, for example, it wouldn’t be able to command as high a subsidy as its used to, but Apple could theoretically make up the difference in volume – a scenario which is more likely than not.
Huberty included the following chart which purports to show the extent iPhone market share would grow with multiple carrier distribution.
Above are the top 6 iPhone markets worldwide, and you can see that with a multi carrier model, iPhone market share could potentially double in some areas.
Citing this potential for growth, Hueberty upped her 2010 EPS estimate for Apple up to $10.50 a share, up from a previous estimate of $10 a share. Huberty also anticipates revenue of $45.3 billion riding on the sale of 41.7 million in iPhone sales.