Apple Inc. (NASDAQ:AAPL) was able to sell a large number of iPhone 4S models last year when it was just one model. But this time around with the iPhone 5, because of varying editions of 4G wireless network capability in the U.S. and fragmentation among the major carriers, Apple had to create three different editions of the iPhone 5. What does this mean? Aggravation and potentially extra expense for customers, but perhaps even higher sales for Apple.
It is all about churn. You see, Apple Inc. (NASDAQ:AAPL) wanted to make its iPhone 5 as available as possible across the entire U.S. wireless market. Unfortunately, though, the company had to make different models because each of the major carriers carry their LTE service over different radio frequencies; and while the iPhone 4S was a combined GSM/CDMA device, Apple Inc. (NASDAQ:AAPL) had to make two GSM model and one CDMA model in order to meet all the radio frequencies that the carriers use.
Apple Inc. (NASDAQ:AAPL) offers up iPhone 5 GSM model A1428, which seems to be made for AT&T Inc. (NYSE:T) because it works for on LTE channels 4 and 17; plus GSM model A1429 for LTE channels 1, 3 and 5; and CDMA model A1429 for LTE channels 1, 3, 5, 13 and 25. The A1428 model seems to be for most North American GSM networks, while the GSM A1429 is for other international networks, as GSM is the most-used network worldwide.
What does all this mean? Well, if an Apple Inc. (NASDAQ:AAPL) iPhone 5 user is on the AT&T Inc. (NYSE:T) network but decides to switch to Verizon Communications Inc. (NYSE:VZ), or vice versa, that customer will have to get a new handset for the switch because the two companies’ LTE networks are not compatible with each other and thus use different models of phones (A1428 for AT&T, the CDMA A1429 for Verizon). Therefore, churn will be a big factor into determining Apple Inc. (NASDAQ:AAPL) sales, if customers have to switch handsets. This would be good news for investors who track this information, including hedge-fund manager Julian Robertson of Tiger Management.