In early January, Verizon CFO noted that Verizon had activated over 4.2 million Apple (NASDAQ:AAPL) iPhones during the fourth quarter of 2011, doubling the amount activated during the 3rd quarter of 2011. AAPL experienced heavy sales of the Verizon iPhone upon release and both companies were seeing an increase in revenue.
On Tuesday, Verizon officially announced its earnings for the 4th quarter of 2011, noting that they activated 4.3 million iPhones during the 4Q. With total smartphone sales of 7.7 million units, the iPhone comprised of 55% of Verizon’s the total amount of sales.
Smartphones now count as 44% of Verizon’s postpaid customer phone base, moving up from 39% in the third quarter. However, with this increase in iPhone sales, Verizon’s margins were affected slightly because of the upfront costs that Verizon paid to the manufacturers for their phones. This decrease in margin will later be regained from the 2 and 4 year contracts that many customers signed with the carrier.
This allows carriers such as Verizon, Sprint, and AT&T to buy large shipments of iPhones with a major upfront cost, and profit on the back end. Ultimately, the carriers make more money off contracts as they activate more and more iPhones. Verizon is rumored to release a 4G LTE iPhone 5 later this year, which could potentially increase the current 55% of total smartphone sales.