Monday, July 15, 2013

Verizon and Apple... Commitment Issues?

Verizon Wireless made a multibillion-dollar commitment to buy a certain amount of iPhones in order to get the phone on its network. However, Verizon does not seem to be selling as many of the devices as it thought it could. This could result in a contract penalty or impact future contract negotiations with Apple.
At the end of 2009, Verizon reported roughly $100 million in commitments for the period from 2011 to 2013. By the end of 2010, around the time it would have signed its deal to start selling iPhones, the reported purchase commitment over the same three years suddenly jumped to $45 billion. Verizon reported iPhone sales have lagged behind its commitments. "Vodafone's 2010 filing showed the $45 billion broken down to $13.7 billion in expected purchases for 2011, $14 billion for 2012 and $17 billion for 2013. But Verizon Wireless reported purchases counting toward its commitments of only about $8.4 billion in 2011 and $10.1 billion in 2012."
For 2013, the rollover total is $23.5 billion. And in 2011 and 2012 combined, Verizon Wireless sold an estimated $16.5 billion. Google and Samsung phones (increased competition) is most likely to blame.
Verizon has been down a couple percentage points over the last couple market days.

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