U.S. Cellular embraces iPhone after rejecting it

Josh Miller/CNET

U.S. Cellular, the only major U.S. wireless carrier to resist the iPhone, says it's going to start selling it this year.

CEO Mary Dillon announced the reversal Friday on a call with investors and analysts. She didn't specify exactly when the company would start selling Apple's phone or what models it would carry.

A year and a half ago, Dillon said U.S. Cellular Corp. (USM) had the opportunity to carry the phone but rejected it because it was too expensive. The iPhone is more expensive than most smartphones, and phone companies absorb this cost to sell it for $199 or less.

Dillon says many of the customers leaving the Chicago-based company are doing so because it doesn't carry the iPhone. In the 18 months since she talked about rejecting the iPhone, the company has lost 268,000, or 5 percent, of its customers on contract-based plans, which are the most lucrative.

Apart from the wholesale cost of the individual phone, carriers face another obstacle: Apple (AAPL) requires them to commit to purchasing a minimum amount. In the case of U.S. Cellular, it has promised to buy $1.2 billion worth of iPhones over three years, according to a regulatory filing. That's roughly 2 million phones.

Investors appeared to be concerned about the cost of the phone, too. U.S. Cellular shares fell $1.08, or 2.8 percent, to $37.39 in afternoon trading. The company has its own stock listing, but is controlled by Telephone & Data Systems Inc., a phone company.

With U.S. Cellular's embrace of the iPhone, the six biggest cellphone companies in the U.S. all now stock it. Many smaller ones do as well. The iPhone was sold exclusively by AT&T (T) for 3-1/2 years, and the subsequent broadening of the carrier base has been crucial in boosting Apple's sales. No. 4 T-Mobile USA was locked out of the iPhone club for a long time, but started selling it last month after a network revamp enabled the company to offer high-speed data service on the phone. U.S. Cellular is the fifth largest cellphone company, after No. 5 MetroPCS combined with T-Mobile (TMUS) this week.

U.S. Cellular also has a new high-speed data network, and Dillon said that was a factor in the decision to accept the iPhone.

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