Will T-Mobile Get the iPhone?

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NEW YORK (TheStreet) — Apple's (Stock Quote: AAPL) path to U.S. smartphone dominance may take an abrupt detour as the iPhone's next destination may be Deutsche Telekom's T-Mobile and not Verizon (Stock Quote: VZ).

AT&T will lose its exclusive agreement to sell the iPhone sometime next year and Verizon has been the leading candidate to take on the popular Apple phone next, but Thomas Weisel analyst Doug Reid disputes that assumption.

Reid points to the growing division between warring wireless camps. Verizon and Google represent one side with the Motorola Droid (Stock Quote: MOT) effort vying against the powerful AT&T and Apple iPhone combo. In that scenario, T-Mobile makes an easy addition to the Apple empire, says Reid.

"Apple wants to move away from exclusivity; T-Mobile would achieve this for Apple in the U.S.," Reid says. Notably, Apple already sells phones through Germany's T-Mobile unit.

The problem, however, is after conquering AT&T (Stock Quote: T), the second largest wireless player, Apple needs a way to reach a bigger block of potential users. With 71 million customers, Verizon is the largest wireless player and one of the last large untapped sales opportunities for Apple. T-Mobile, by contrast, is a big step down with only half as many users as Verizon.

Investors are likely to view a move to T-Mobile next year instead of Verizon as a far less lucrative option for Apple.

Verizon originally rejected Apple's exclusivity offer three years ago over control issues. And instead of trying to mend its relations with Apple, Verizon has spent the past year forging a rival partnership with Google to counter the iPhone offensive.

A Verizon spokesperson declined to comment. But while Verizon has publicly said it remains interested in a deal with Apple, Reid suspects it won't involve the current generation of iPhones.

What's more likely, Reid says, is that Verizon makes a deal to sell other Apple devices like the elusive Apple Tablet and the next version of the iPhone running on long-term evolution or LTE, a fourth generation wireless technology.

In other words, Reid expects Verizon to wait for something special rather than put its name on a three-year-old iPhone. But that could be a long time from now.

"We expect Verizon to offer only 4G Apple handsets in 2011," Reid says.

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