By Sinead Carew
NEW YORK (Reuters) - VERIZON (VZ.NY)Wireless plans to sell Apple Inc's iPhone for as low as $200 starting next month, putting the smartphone at the center of its high-stakes battle with AT&T Inc for wireless customers.
Verizon's announcement on Tuesday that it would start selling the phone on February 10 puts an end to AT&T's three-year-old status as the exclusive U.S. provider for the iPhone. Pre-orders start on February 3.
Verizon Wireless said the phone, a version of the Apple iPhone 4 designed to run on Verizon's network, will sell with a two-year agreement for $199.99 for the 16-gigabyte model or $299.99 for the 32-gigabyte model.
The prices are the same as what AT&T charges for those models.
Verizon, a venture of Verizon Communications and Vodafone Group Plc, said the phone would be available at 2,000 of its stores around the country. It declined to comment on service price plans.
AT&T, which loses its cherished spot as the exclusive U.S. provider for iPhone, is expected to face its toughest year since 2004 as a result of the Verizon deal with Apple.
"The real question isn't how many iPhones Verizon will sell, but what AT&T does in response," said Bernstein analyst Craig Moffett, who attended the Verizon event.
Analysts, pointing to years of pent-up demand among Verizon Wireless customers, expect the company to sell 9 million to 13 million iPhones this year.
CALLING ALL COMPETITORS
Kim Caughey Forrest, a senior analyst with Fort Pitt Capital Group, which holds shares in Verizon, said she believes there are many people in the eastern United States who have wanted an iPhone, but have been reluctant to get one because of worries about the quality of AT&T's network.
She cited her home town of Pittsburgh, Pennsylvania.
"A lot of people in Pittsburgh are really excited about the prospect of having a Verizon iPhone. I don't believe they are alone. I don't think we are a unique market," she said.
AT&T, which has come under fire for patchy wireless service in some cities, nonetheless added an estimated 15 million new iPhone customers in 2010. Now it is expected to launch a new advertising campaign striking back at Verizon.
"For iPhone users who want the fastest speeds, the ability to talk and use apps at the same time, and unsurpassed global coverage, the only choice is AT&T," an AT&T spokesman said after the Verizon announcement.
Another company facing a threat from the new deal is phone maker Motorola Mobility, which has made a comeback as the flagship phone vendor at Verizon Wireless for the past year.
Motorola phones run on Google Inc's Android software, which has become Apple's most formidable rival in cellphone technology.
Verizon Wireless last week said it was committed to selling Motorola products, including a high-speed phone called the Droid Bionic phone and a tablet called the Xoom.
One problem for Verizon Wireless may be the high cost of selling Apple products, which come at a premium to other smartphones, analysts said.
Like AT&T, Verizon Wireless will have to shoulder part of the cost of the devices to convince people to sign long-term contracts.
Verizon Wireless will have to pay a $400 subsidy for each iPhone it sells if it keeps the price in line with AT&T's, UBS analyst John Hodulik estimated.
Shares of Verizon fell 2 percent to $35.16, while AT&T shares were down 1.3 percent to $29.97. Shares of Apple slipped less than 1 percent to $341.50.
(Additional reporting by Gabriel Madway in San Francisco, Jim Finkle in Boston and Jennifer Saba and Ritsuko Ando in New York. Writing by Paul Thomasch. Editing by Robert MacMillan)
