Apple's Dominance Has Carriers Cheering for Nokia Windows Phone
April 25 (Bloomberg) -- AT&T Inc. and Verizon Wireless, facing concerns that Apple Inc. and Google Inc. have too tight a grip on the market for smartphone software, are cozying up to Microsoft Corp. and Nokia Oyj.
When they reported quarterly results this month, both carriers praised Microsoft's Windows Phone operating system, which runs the new Nokia Lumia phone. AT&T began offering the Lumia 900 for $99.99 on April 8, and Verizon is preparing to add a new Nokia model to its lineup soon. AT&T declined to give sales figures for its device.
The companies are counting on the Lumia and forthcoming Windows models to provide an alternative to Apple's iPhone and Google Android handsets. While AT&T and Verizon sell millions of those devices, the products can be more costly to subsidize, especially the iPhone. The companies also face the risk that an Apple-Google duopoly will erode carriers' ability to distinguish themselves and will further squeeze their profit margins.
"We want the Lumia to succeed -- we love to have competition in the handset market," AT&T Chief Financial Officer John Stephens said in an interview. "It's always better to have more choices for your customers."
For now, most of AT&T's smartphone customers are opting for the iPhone. The Apple device made up 78 percent of the carrier's smartphone sales in the first quarter. At Verizon, which added the iPhone to its network more recently, the product accounted for 51 percent. The company relies more on models running Android.
Apple's profit almost doubled to $11.6 billion last quarter, lifted by the surging popularity of the iPhone, while revenue jumped 59 percent to $39.2 billion. The company sold 35.1 million iPhones in the period.
Apple requires carriers to subsidize the phones at a higher level, leaving less room for profit, said John Hodulik, an analyst at UBS AG in New York.
"They hope Lumia can take some market share to help lower their subsidy costs, now that so much of the spending is in Apple's favor," he said.
Verizon Communications Inc. Chief Financial Officer Fran Shammo also said there was a need for another player in the smartphone software arena. Research In Motion Ltd., which has served that role, has seen its market share slide.
"It is important that there is a third ecosystem that's brought into the mix here, and we are fully supportive of that with Microsoft," Shammo said on Verizon's earnings call last week. Android "is an incredible platform today that we helped create. And we're looking to do the same thing with a third ecosystem."
AT&T rose 3.6 percent to $31.72 at the close yesterday in New York. Shares of the Dallas-based company have climbed 4.9 percent this year. Verizon Communications, the co-owner of Verizon Wireless, climbed 2.4 percent to $39.50 yesterday. The New York-based company's stock has fallen 1.5 percent in 2012.
Nokia reported sales of about 2 million Lumia phones in the first quarter. The Espoo, Finland-based company plans to increase advertising spending on the product this quarter, Chief Executive Officer Stephen Elop said last week.
Both Microsoft and Nokia have staked their fortunes on the new lineup of Windows Phone devices. Microsoft, based in Redmond, Washington, aims to regain market share lost to Apple and Google. Nokia, meanwhile, is trying to rebound from four straight quarters of losses and a stock price trading near a 15- year low.
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