5% Upside to AT&T’s Stock if 40% of BlackBerry Users Switch to iPhone

+55.23%
Upside
18.01
Market
27.96
Trefis
T: AT&T logo
T
AT&T

A recent survey by Crowd Science suggests that AT&T (NYSE:T) could benefit if a large number of BlackBerry users were to switch to Apple’s (NASDAQ:AAPL) iPhone.  The survey indicates that about 40% of the current BlackBerry users would prefer an iPhone as their next smartphone.

While this is likely to concern Research in Motion (NASDAQ:RIMM), the maker of BlackBerry phones, it could be beneficial to AT&T (NYSE:T) if the survey results were to materialize while AT&T remains the exclusive mobile operator for iPhones in the US.

We estimate that if 40% of the BlackBerry users in the US switch to the iPhone, AT&T could see an upside of about 5% to $37 Trefis price estimate for AT&T’s stock.

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Below we give reasons why BlackBerry users want to switch to the iPhone and how such an event could lead to an upside in AT&T’s stock price.

BlackBerry’s Brand Loyalty Is Diminishing

The mobile phone market is seeing a slew of smartphones with new features and technologies, and BlackBerry users are being lured to these products that offer features comparable to that of BlackBerry.

1) 7% of BlackBerry owners use their phone only for professional purpose

The BlackBerry remains the dominant smartphone amongst corporate professionals due its security features and long battery life.  The phone’s software easily integrates with several applications like Microsoft Exchange and Lotus domino, and offers the facility to edit Microsoft Office documents.

However, it is interesting to note that only about 7% of BlackBerry users use their phone solely for business purposes, while 93% use their phone for personal as well as professional purpose.  This suggests that BlackBerry users will be increasingly attracted to smartphones like iPhone that offer features that may be more desirable for personal use.

2) iPhone Increasingly Capable as a Business Phone

Apple is making improvements in iPhone’s operating system to meet corporate requirements.  Some of the added technical features include Lightweight Directory Access Protocol (LDAP) support for contacts, wireless CalDAV syncing, improved VPN support, improved exchange support, encrypted backups as well as several security and authentication protocols.

As the iPhone makes headway into the corporate world as a viable alternative to the BlackBerry, its significant advantages in personal use will drive users to switch.

$2 (>5%) Upside For AT&T If 40% of US Blackberry Users Switch To iPhone

There were about 15 million BlackBerry users in the US in 2009 and we estimate that about 4.5 million of these were AT&T subscribers.  The remaining 10.5 million non-AT&T BlackBerry subscribers represent a big opportunity for AT&T, should some of them switch to the iPhone.

If, as the Crowd Source survey data suggests, about 40% of BlackBerry subscribers switch to the iPhone as their next smartphone, this could mean a net subscriber gain for AT&T of about 4 million subscribers.  This assumes that the switch would happen while AT&T remains the exclusive provider of iPhones in the US.  Although such a switch is unlikely to materialize quickly, it provides a best case scenario for the potential impact on AT&T.

$1 of Upside from Increase in Market Share

A gain of 4 million subscribers equates to a market share increase of about 1 percentage point for AT&T.

$1 of Upside from Increase in Average Plan Pricing

In addition to AT&T’s increase in market share, 4 million new iPhone subscribers would increase the average revenue that AT&T earns each month from subscribers by about $2.

We estimate that average monthly revenue per user (ARPU) for BlackBerry and iPhone is nearly the same at around $100.  In comparison, the average monthly revenue per user for AT&T overall, including BlackBerry and iPhone users, is expected to be around $40 in 2010.  A larger subscriber base of iPhone users would increase this average by about $2 to $42 in 2010.

We estimate that AT&T could earn incremental revenues of about $5 billion if 40% of US BlackBerry users were to switch to the iPhone immediately.

You can modify our forecasts above to see how an increase in AT&T’s iPhone user base would result in a $2 (>5% upside) to our $36.89 price estimate for AT&T’s stock.

For additional analysis and forecasts, here is our complete model for AT&T’s stock.