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Verizon Blindsided By Tardy iPhone 5 Launch?

Verizon Wireless blames slower smartphone growth on iPhone 5 not launching in June as expected. But was Verizon legitimately surprised?

Speaking at the Oppenheimer Technology & Communications Conference on Wednesday, Verizon Communications CFO Fran Shammo expressed the company's surprise at the later-than-usual launch of the Apple iPhone 5.

"Obviously we're disappointed that the iPhone 5 didn't come out in June," Shammo said. "We continue to prepare for it and when that comes we'll be ready."

In each year between 2007 and 2010, Apple introduced a new iPhone in either late June or early July. This year, Apple didn't. Apple has provided exactly *zero* information about a new iPhone--if one even exists. Right now, most in the industry believe it will launch in September or October. No one knows for sure. Verizon expected Apple to stick to its typical behavior. Verizon (and everyone else) was mistaken.

Shammo goes further. He blames the iPhone 5's delayed appearance for slower smartphone growth in the company's wireless unit.

"Obviously this will slow our smartphone penetration down from where we thought it would be," he said. "We [hoped we] would end the year around 50% but that will probably delay that for a quarter to the first quarter of next year to hit that target." Verizon expects demand for the iPhone 5 to be bigger than demand for the iPhone 4.

In other words, it is Apple's fault that the percentage of smartphone users on Verizon's network isn't higher. According to its most recent quarterly earnings report, the percentage of smartphone users on Verizon's network is far smaller than AT&T's. AT&T reported that 49.9% of its postpaid subscribers are now using smartphones. Verizon's smartphone usership is much lower at 36%, up from 32% last quarter. The actual numbers, however, show that Verizon isn't that far behind. Verizon has 32.29 million smartphone users compared to AT&T's 34.2 million.

When it comes to iPhones, Verizon Wireless also trailed rival AT&T. Verizon Wireless activated 2.3 million iPhones during the second quarter, compared to 3.6 million activated by AT&T. Together, Verizon Wireless and AT&T accounted for 5.9 million--or about 30%--of Apple's total quarterly iPhone sales.

Honestly, I am not sure what to make of Shammo's comments. He's the one who leaked that Verizon Wireless will have access to the iPhone 5 the same time that AT&T will, and that it probably won't have LTE 4G.

What rings false, however, is the idea here that Verizon is legitimately surprised by the later debut of the iPhone 5. Dan Mead, Verizon Wireless's CEO, said when the company announced the iPhone 4 for Verizon Wireless in January that the company tested the iPhone 4 for a full year before launch. Certainly Verizon Wireless is already testing the next-generation iPhone from Apple. If it is testing the device, it has a general idea of when it might launch. Perhaps Verizon Wireless isn't sharing all the information in its hands with its parent company?

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