U.S. Cellular to iPhone: Thanks, but no thanks

During U.S. Cellular's third-quarter earnings call, CEO Mary Dillon said the carrier considered carrying the iPhone, but turned it down because of Apple's terms.

Kent German Former senior managing editor / features
Kent was a senior managing editor at CNET News. A veteran of CNET since 2003, he reviewed the first iPhone and worked in both the London and San Francisco offices. When not working, he's planning his next vacation, walking his dog or watching planes land at the airport (yes, really).
Kent German
2 min read
Apparently, U.S. Cellular could keep its hands off the iPhone. Josh Miller/CNET

Just over a year after enthusiastically telling CNET that U.S. Cellular wanted the iPhone, the carrier's CEO has changed her mind.

During the company's third-quarter earnings call today, Mary Dillon said that U.S. Cellular considered adding the iPhone to its lineup, but that Apple's "terms were unacceptable from a risk and profitability standpoint." Dillon didn't offer specifics, Fierce Wireless reported, but she added that the potential strain on the carrier's data network was not a factor.

Though U.S. Cellular's decision may come as surprising following the arrival of the iPhone 4S at both Sprint and regional carrier C Spire (formerly Cellular South), Apple has been able to draft carrier agreements that put it in a far stronger position than other handset manufacturers. As J.P. Morgan analyst Philip Cusick told CNET in late August, Sprint pays Apple an estimated $400 to $425 per iPhone. Other manufacturers, however, get a subsidy of $150 for a typical 3G smartphone and $250 for a standard 4G smartphone.

CEO Mary Dillon

If subsidy wasn't an issue, Apple may have asked for additional income from every new iPhone contract or demanded that the carrier add capacity or expand its network to more subscribers. Whatever the reason, though, Dillon said that U.S. Cellular may reconsider carrying the iPhone in future.

Tiered data plans
Later in the call, execs said U.S. Cellular would introduce tiered data plans in the first half of next year. Though its smartphone lineup was relatively small just two years ago, the carrier now offers a decent selection of Android and BlackBerry devices. What's more, the company said smartphones during the third quarter amounted to 39.9 percent or total sales (up from 23.6 percent the same period last year) and postpaid smartphone customers increased to 26.2 from 12.1 percent.

LTE and financials
As the sixth-largest carrier behind the "Big 4" (Sprint, Verizon Wireless, AT&T, and T-Mobile) and MetroPCS, U.S. Cellular also is the last provider to activate 4G (or "4G-like") service. During the call, Dillon said that LTE service will roll out to 25 percent of U.S. Cellular's network by the end of the year and that the carrier will introduce its first LTE devices in the first quarter of 2012.

As for financials, the company reported (PDF) that when compared with the third quarter of last year, net income climbed 62 percent to $62.1 million, total revenue rose 5 percent to $1.11 billion, and that the churn rate was 1.5 percent with a net loss of 23,000 retail customers.