By Cassimir Medford

The Apple iPhone could tilt the mobile balance of power further in Cingular’s favor, but the price of the device and the fact that it’s available only for Cingular’s network will limit its effect on Verizon Wireless’ inexorable climb to subscriber parity with Cingular, according to at least one analyst.

At $500 and $600, the Apple iPhone is expensive, and considering the current price range of high-end multifunction cell phones, it will most likely attract only well-heeled, avant-garde buyers.

It is hardly a mass-market device like the iPod shuffle or the nano, so a number of market analysts including Richard Windsor of Nomura have deemed the target of 10 million devices sold by 2008 too ambitious.

“Given the timing, geographies, and the fact there is only one device, we think that 2 million devices could be sold in 2007 is the best instance,” he wrote in a report.

“If very successful, a further 5 million could be sold in 2008, but we believe that the device is too expensive to achieve anything like the success that the RAZR has had,” Mr. Windsor concluded.

A Single Carrier

Exactly why Apple chose to limit its market to a single carrier and a single technology, GSM (global system for mobile communications), is tough to figure, independent analyst Peter Gorham said.

Cingular Wireless is the market leader in the United States with 58 million subscribers, but it is closely followed by Verizon Wireless with 57 million and Sprint Nextel with 53 million.

United States

Will Verizon Wireless and Sprint Nextel subscribers switch to Cingular just to get the iPhone?

“Some will, but I don’t think there are a large number of people in the New York area who will be willing to forgo Verizon for Cingular,” said Mr. Gorham. “It is a must-have device that changes the game in cell phones, but the Cingular exclusivity restricts Apple’s potential market share.”

New York

Verizon Wireless has spent a king’s ransom on advertising to promote its network, and the company has been particularly successful in driving home that message in affluent areas, particularly in the gold-plated Northeast.

In the third quarter of 2006, Verizon Wireless out-gained Cingular in adding new subscribers. While Cingular added 1.4 million new subscribers, Verizon Wireless added 1.9 million.

Shares of Apple rose $4.68 to $97.25 in recent trading, while shares of Cingular’s parent company AT&T climbed $0.33 to $34.27 and Verizon Communications shares dropped $0.34 to $36.62.

Asian Invasion

One assumes that Apple will market CDMA (code division multiple access)-based iPhones in markets such as Japan where that technology dominates, but for its period of exclusivity with Cingular, it will be a GSM-only phone.

Japan

“If Apple had done a phone for Verizon, it could have rolled out simultaneously in Japan on KDDI,” Mr. Gorham said.

Japan

“But I think they are going to sell more than 10 million because even a hardnosed Verizon subscriber like me wants to get the iPhone,” he continued. “Those who can afford it will get it, so Verizon will feel a pinch at least this year.”

Similarly, Mr. Windsor believes that there will be some near-term fallout for smartphone makers due to the introduction of the iPhone, but the one-carrier problem and the fickleness of the U.S. user will ultimately determine the future of the iPhone.

U.S.

“Usability of the functions where Apple is historically strong (music, images, and video) looks sensational, but the phone and email functions are more questionable,” he wrote.

“Negative in the medium term for the smartphone incumbents, but only time in the hands of consumers will determine a hot product from a flash in the pan,” he concluded.