Chicago (IL) - Verizon's chief Ivan Seidenberg reveals interesting details about plans to leapfrog AT&T to become the largest wireless carrier in the US. In a rare interview with The Financial Times, Seidenberg commented on rumors that Verizon is up for a sale and fired a couple of jealous shots at Steve Jobs.
With a market capitalization of $102 billion, Verizon Communication is the second US carrier and the fifth largest in the world. Company acquired the fifth-largest US wireless carrier Alltel this month in a deal worth $28.1 billion. Seidenberg claims that the resulting company is going to be bigger than the AT&T and that it will push Verizon to the top spot in the US mobile arena with 80 million customers. But some think telecom consolidation will eventually eat up Verizon, despite such an aggressive expansion. Seidenberg promptly dismissed the idea. "We're not for sale. And in case you didn't get that the first time, we're not for sale. OK?" he told the reporter.
Mobile internet is the mobile operators' Holy Grail
Although 80 percent of the US population now owns a mobile phone, Seidenberg says wireless carriers have discovered a new revenue stream in form of high-volume data traffic over the cell network for email and web surfing activities popularized by the ubiquitous iPhone. As more various devices with an emphasis on mobile internet come to the market and become popular, carriers will generate additional revenue by charging for data access.
Most US carriers today now charge $30 a month for an unlimited 3G data plan for PDAs and smartphones. Compared to the usual $20 a month for unlimited EDGE plan, carriers are now charging $10 premium for the same service on a faster network, justifying this with huge investment into 3G deployment. For instance, Verizon's competitor AT&T will have invested more than $20 billion in network improvements and 3G upgrades between 2005 and 2008. AT&T is betting that iPhone 3G can increase its revenues with high-quality, data-centric customers.
Other carriers are frustrated because many lucrative customers have accepted the iPhone as the device of their choice. The fact that competitors have so far been unable to produce handset that will be equally accepted among users for mobile internet is actually postponing carrier's plans to monetize on their 3G networks.
Verizon isn't afraid of Google or Apple
These carriers are hoping that new breed of smartphones focused on mobile internet will increase their service revenues because more users will purchase data plans and Verizon's chief is positive that his company is well positioned to grab a significant chunk of the mobile internet service revenues. Hopes of a proliferation of iPhone-like handsets this summer were dampened when it became clear that Android is facing unexpected technical difficulties and delays. This turn of events is forcing carriers such as Verizon to sit through this summer, perhaps even Christmas holiday season, and watch Apple winning consumers with the iPhone 3G.
Interestingly enough, Seidenberg isn't afraid that in the future companies like Google may provide wireless internet services through WiMax, reducing traditional wireless carriers to infrastructure provider. He believes that the mobile phone is "the most disruptive thing in business," noting that mobile operators will soon become the primary beneficiary of today's trend when more and more useful features become common on handsets, such as mobile internet, online banking, mobile gaming etc.
Verizon's chief will wait for Steve Jobs to get old
Seidenberg was particularly vocal about the pressure coming out from Apple, the company credited for turning the mobile internet into a user-friendly feature. Seidenberg dismissed Apple, pointing out its small global handset market share, and saying he doesn't believe AT&T subsidy will turn iPhone 3G into a mass-market hit, even at $199 price point.
Verizon's chief also offered unique explanation on how he plans to fight off what seems to be an aggressive iPhone expansion both in terms of innovations and smartphone market share (Gartner has put Apple as third largest smartphone maker globally, and second largest in the US).
"Mr Jobs has no monopoly on innovation," says Seidenberg, suggesting that Steve Jobs "will eventually get old." However, Steve Jobs is already old and it’s arguable whether iPhone competitors will have an easier time when Jobs steps down.
This revealing interview underscores the fact that most analysts agree on: carriers and mobile phone makers who are trying to beat Apple at its own game will have a hard time knocking down the iPhone. Companies that compete with Apple first have to stop being obsessed with the iPhone to be able to come up with their own, innovative platform, ecosystem and eventually with a killer product. It's true that innovation isn't exclusive to Apple, but the problem for handset makers is that these days innovation mostly lives in Cupertino, California.