Verizon may owe Apple $14B for unsold iPhones

By , Jul 11, 2013

Verizon Network

Amid cooling iPhone demand, some carriers are having trouble meeting its sales commitments to Apple – and the smartphone maker is in no mood to ignore the issue. One carrier, Verizon Wireless, could be on the hook for up to $14 billion worth of unsold iPhones, one analyst told investors Thursday.

Although Verizon pledged in a 2010 agreement to buy $23.5 billion worth of Apple handsets in 2013, meeting the commitment would demand the U.S. carrier sell more than twice as many iPhones this year as in 2012…

Since doubling sales in what many view as a down year for iPhone demand is unlikely, Verizon may owe Apple between $12 billion and $14 billion in unsold inventory, according to Craig Moffett analyst with his newly-opened independent research firm Moffett Research.

According to Bloomberg, analysts forecast Apple will report a 22 percent drop in net revenue to $6.87 billion during the third quarter. Apple is scheduled to announce its earnings for the three-month period on July 24.

Coupled with the fact the iPhone comprises around half of Apple sales and the company “would be reluctant to simply ignore these commitments,” Moffett writes.

iPhone 5 (three-up, profile, front, back, black and white)

The analyst described it as “unrealistic” to expect the company not to “extract some considerations for renegotiating these shortfalls.” Since other carriers will potentially find themselves in the same position as Verizon, don’t expect Apple to void the agreement.

Rival carrier Sprint may be in a slightly better spot.

Signing its iPhone sales agreement in 2011, the carrier pledged to buy slightly fewer Apple handsets – $15.5 billion worth over four years. If Sprint doesn’t stumble, the provider should be able to meet that target, according to Moffett.

iPhone 5 (black, two-up, flat, front, back)

The claim that some carriers are having trouble meeting their iPhone purchase commitments is just the latest reason why some wireless providers are standoffish when it comes to the Apple handset.

While some firms complain of Apple’s tight control of the iPhone, others balk at the high subsidies required. All together, the result is a slowdown in the number of new Apple carrier partners.

Less than a dozen new service providers have signed onto selling the iPhone since 2011. Samsung’s carrier reach, for example, is more than twice of Apple’s. Notable iPhone carrier holdouts include the world’s biggest wireless company, China Mobile.

In countries which could become the latest areas for smartphone growth – like India and Russia – Apple is also searching for partners. All together, billions of potential iPhone customers are said to be left on the table because of Apple’s stringent sales requirements that are now being investigated over in Europe.

  • Share:
  • Follow:
  • nsfw

    honestly they should just give away the iphone 5 at this point. considering that a 24 month commitment would generate $2000+ of income for Verizon.

    • Rowan09

      I agree

    • Pitchy

      But they have that greed factor going in when they can say hey, let’s try to sell these at a reduced cost on contract and milk our customers for another $100

    • Kurt

      I’ve been dodging a phone number for about a month. Calls every day. Today my wife answered, turns out, it was my cell phone company. 3rd time we had to say no, we don’t want free iphones. Been trying to give us a free iphone each since March! Unbelievable!

      • Falk M.

        Oh poor you, I’m sure the starving children in Africa will light a candle for you! ;P

        (no offense, just subtract the drama ;P )

      • Kurt

        I know many people would love a free iPhone, and I wold have too before, but It’s pretty annoying getting called numerous times about the same things when I’m dead set on switching. Why would I accept a free iphone 5 now, when I said months ago no. silly carriers

      • Falk M.

        Just take it and ship it to me. I’ll cover the shipping costs and 20 USD for your time.
        Plus, having gotten that sucker you won’t be called by your carrier again.
        (If they do, please let’s repeat this)

      • Kurt

        I studied in Heidelberg, don’t I deserve a little more than 20 bucks for my time? But, next time I get that call…you’ll get the phone!

      • Falk M.

        Haha, okay, thanks!

        Message me at glassedsilver @ google’s mail service .com (*packs away spam-bot deterrent*) when the time has come haha

    • Raul Henriquez

      Carriers are greedy

    • OUTFOXEM

      Verizon wouldn’t be allowed to give them away. Part of their contract with Apple stipulates a minimum selling price.

      If they gave them away it would seriously devalue the phone and make it nearly impossible for other carriers to sell at full price.

      That sounds great to us, but not so great for Apple. Therefore the stipulations exist.

  • Raul Henriquez

    Good Verizon deserves it, as they are trained to push cheap android phones because they make more commission on each one. This is a problem with Verizon retail stores and I’m not sure if its supported or frowned upon by corporate.

    • corey k.

      i worked at AT&T and they do the same thing bc we made more profit on android. and the iphones where always last ditch effort to make a sale.

      • corey k.

        but almost everyone wanted the iPhone

      • Raul Henriquez

        Yeah because people who buy iPhones already had educated themselves before buying it. So no pitch sale works : )

      • Raul Henriquez

        Exactly so you can confirm this is true.

      • corey k.

        im actually starting at verizon next month and during my interview he said the give us cold calling lists to call customers back to try and sell phones.

      • Raul Henriquez

        wow thats bs

  • Jake M

    Well, Verizon has terrible deals, they cheat every one of their customers out of their money, they don’t help you at all.. Only good thing about them is that they cover some areas other carriers don’t and thats why I’m stuck with their bull$#!& plan.

  • Gorgonphone

    lol thats cause silly verizon keep trying to push android device over iPhones..lol

    • critiq

      no, it’s because iphone innovation stalled for too long now and it’s boring.

      • Gorgonphone

        The whole. The whole phone intdistry is boring now

      • Dumb

        Yeah, if you are focused on the phones that aren’t bringing anything new to the table, it will seem very boring.

    • Dumb

      Verizon was one of the most popular mobile carriers BEFORE they sold the iPhone.