), which competes with other service providers like AT&T (
) and Sprint (
) in the wireless business, has recently started selling the iPad.
Until recently, AT&T was the only wireless career offering
) popular tablet device.
Although the move may be significant from perspective of
relationship development between Apple and Verizon, as mentioned by
, we believe that direct success of Verizon's current iPad offering
may be very limited. Currently the iPad is not compatible
with CDMA so users will need to carry a MiFi device to connect to
Average data revenue per subscriber
(ARPU) is a key driver to our mobile data revenues, and we
believe that the current iPad offering will not impact ARPU in the
near term. Our
current price estimate is $31.69 for
, which is slightly below the current market price.
MiFi Device Requirement
Apple does not have a CDMA version of iPad, which is the mobile
technology that Verizon uses, and 3G iPads from the company can
only connect to GSM networks. Thus in order to connect the iPad to
Verizon's network a user requires an additional MiFi device that
connects to Verizon's CDMA network and creates a local WiFi cloud.
The user can then connect his/her iPad to this cloud and access the
Verizon is selling WiFi iPads bundled with its MiFi device.
Although this combination costs same as the 3G iPad from AT&T,
carrying an additional device may deter some users from buying the
bundle from Verizon.
iPad is positioned as a quality mobile device and therefore
convenience and mobility are important, and we feel the MiFi device
presents a handicap. Additionally, the battery life of the MiFi
device is significantly less than the iPad's thereby limiting usage
time without recharging.
Carrier Data Plans
Verizon is offering 3 data plans for the iPad which include $20
per month for 1GB data limit, $35 for 3GB and $50 for 5 GB.
AT&T is offering 2 data plans for its 3G iPad - one for $15 per
month for 250 MB data limit and $25 per month for 2GB.
For users who tend to use low to moderate amounts of data (less
than 2GB per month), AT&T's data plans is cheaper while
Verizon's data plans are a better proposition for heavy data users
(more than 2GB per month).
AT&T claims that 98% of its subscribers use less than 2GB of
data per month. Since AT&T has 30% of the US wireless
subscriber base, we feel this is representative of data usage
habits of consumers in the US. If Verizon's current bundle is
priced for heavy data usage, it might be missing the largest part
of the market.
Overall we believe that in order for the iPad to lift Verizon's
average revenues for data users, Apple will need to make a CDMA
You can see
the complete $31.69 Trefis price estimate for
Verizon's stock here.