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Apple, Verizon consider iPhone deal

Verizon and Apple are discussing the possible development of an iPhone for Verizon, with the goal of introducing it next year, people familiar with the situation say.

It would mark the first time Apple has produced a version of the iPhone for a CDMA wireless network, which is different from AT&T’s GSM technology. Vodafone, co-owner of Verizon Wireless, already sells the iPhone in Europe.

The New York-based telecom entered into “high-level” discussions with Apple management a few months ago, when CEO Steve Jobs was overseeing day-to-day business, these sources say. They declined to be named because they aren’t authorized to speak publicly.

Jobs is on medical leave until June, but the conversations are continuing, they say. Apple declined to comment.

AT&T has exclusive U.S. distribution rights to the iPhone into 2010, though specifics aren’t known. The deal was struck in 2006, when the iPhone was still on the drawing board. Many telecom analysts expect AT&T to try to persuade Apple to extend the contract for another year, at least.

Should Verizon succeed, it would be a big loss for AT&T, says Roger Entner, head of telecom research for Nielsen. “Breaking the (iPhone) exclusivity with AT&T is a huge thing,” he says. “That would send shivers into AT&T’s stock and senior leadership.”

The power of the iPhone was on full display last week, when AT&T reported stellar wireless results. AT&T signed up 1.6 million iPhone customers during the quarter – 40 percent of them new to AT&T. Revenue from mobile data was up almost 40 percent. Verizon reports results today.

By linking arms with Verizon, Entner says, Apple would gain access to its 80 million customers. While a few may already have an iPhone (some people have more than one carrier), the bulk don’t.

Regardless, Entner says, Apple would likely maintain ties with AT&T. The biggest winners, by far, would be consumers, he says.

“They could pick the network they wanted to use: AT&T’s or Verizon’s,” he says. “It would finally give consumers choice, and choice is a good thing.”

Entner says Verizon would fare well in that fight. While AT&T’s 3G network is “somewhat faster,” he says, Verizon’s network “is generally perceived to be better in terms of reliability.”

The biggest loser? “AT&T,” Entner says. “It would be a reversal of fortune, because a lot of people who have been disappointed in AT&T’s network but love the iPhone would probably” jump to Verizon.

Apple would also benefit, he adds, “because that means they’d have to buy a new iPhone.”

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