AT&T retains Apple glitz with iPad deal

The agreement, announced by Apple Chief Executive Steve Jobs on Wednesday, was seen as a coup for AT&T after much market speculation that Apple would choose Verizon Wireless. AT&T already is the iPhone's exclusive U.S. carrier.

Shares of Verizon Communications Inc, which owns Verizon Wireless with Vodafone Group Plc, closed down 0.99 percent at $29.87. AT&T shares rose 1.14 percent to $25.62.

It is a disappointment that it won't be available on Verizon Wireless, Piper Jaffray analyst Christopher Larsen said of the iPad. AT&T is going to get new customers that Verizon could have gotten had iPad been available on its network.

Apple said the most basic version of the iPad, a touchscreen multimedia gadget with short-range WiFi connectivity, will cost $499.99 for 16 gigabytes of storage. Consumers will have to pay another $130 for third-generation (3G) wireless capability.

The tablet will use AT&T's mobile data services, with the carrier charging $29.99 for unlimited monthly access, or $14.99 for up to 250 megabytes of data a month.

Because AT&T is not subsidizing the iPad's price, customers do not have to commit to any long-term service contracts, unlike iPhone users in the United States.

Larsen said the idea of offering unlimited data for a monthly fee without a contract would help spur consumer demand.

It is a new way of doing business, he said. I think it's going to attract a lot of customers to the product, the fact they don't have to sign a two-year deal.

Unlike the iPhone, Apple said the iPad will be unlocked, which in theory means that other operators using the GSM mobile standard should be able to support the tablet.

But in fact, at least for now, only AT&T's 3G service is ideal. The 3G service of Deutsche Telekom AG's T-Mobile USA uses different airwave bands so any iPad users on that network would have to put up with slower speeds.

Verizon Wireless and Sprint Nextel Corp use another mobile network technology that is incompatible with the iPad.

Apple said it hoped to have international wireless deals in place this summer.

In a wireless market where carriers are increasingly dependent on promoting the hottest gadgets to lure customers, to their service, a partnership with Apple is good news.

Jefferies & Co analyst Jonathan Schildkraut said that AT&T already provides the best selection of devices and with the iPad, it is likely to maintain its position as a device leader.

But he said one drawback could be extra strain on AT&T's network if the iPad becomes very popular. AT&T has already admitted to network problems in certain markets, after loud complaints from iPhone users.

Because of the iPad's relatively affordable price, in comparison to laptop computers, Larsen said that it may hurt sales of netbooks, which wireless service providers have been championing as a way to add new customers.

I think it hurts netbook sales. The carriers aren't selling netbooks to make money on netbooks. They're selling them to make money on wireless services, he said.

(Reporting by Sinead Carew; Editing by Tiffany Wu and Richard Chang)