AAPL Apple Inc

By Tripp Mickle and Ryan Knutson 

Apple Inc. is planning to introduce a smartwatch this year capable of connecting to cellular networks, according to people familiar with the matter, marking the first step in liberating the device and possibly consumers from their iPhone dependency.

The new Apple Watch will have LTE capabilities similar to the data connection on a phone, which could allow it to access data, send and receive texts and make phone calls, the people said. Currently, the Apple Watch must be paired with an iPhone and use Bluetooth or Wi-Fi to transmit data and texts.

The cellular-enabled Apple Watch expected later this year would be available from all major U.S. carriers, the people said. It would likely be rolled into existing wireless plans for an additional monthly charge, similar to how data connections for tablets are sold today.

An Apple spokeswoman declined to comment. Bloomberg first reported the new watch on Friday.

The new Apple Watch is part of Apple's plan to begin introducing a new smartwatch every other year, just as it does with the iPhone, one of the people familiar with the matter said. This fall would be the first iteration of the watch under the new release schedule. The first Apple Watch was released two years ago.

Apple Chief Operating Officer Jeff Williams has been pushing for cellular connection on the Apple Watch since before its launch, the person said. However, its development has been challenged by issues related to the quality of cellular reception and other complications that come with such a small device.

"They're going to have to increase the battery significantly, and it's going to get bigger to provide more power," said Patrick Moorhead, a technology analyst with Moor Insights & Strategy. "It's a very hard thing to do because it's so small."

An LTE connection in the Apple Watch is good news for carriers, as the new connections could help pad subscriber counts and bring in new revenue. Carriers relied on tablets in past years to juice subscriber numbers, but many consumers canceled their tablet cellular connections after their contracts expired, resulting in customer losses. A data connection on an Apple Watch may prove more useful, however, and therefore less likely to result in cancellations.

The new watch could help Apple regain its lead in the so-called wearables category. The iPhone maker shipped 2.8 million smartwatches world-wide in the second quarter but ceded top place to Xiaomi Corp., which shipped 3.7 million fitness trackers during the period, according to Strategy Analytics, a market research firm.

The Apple Watch has increased sales since it added a GPS chip last year that allows owners to track their runs, swims and other fitness activity without needing a phone. The LTE functionality would likely add more momentum to sales and could allow people to leave their phones behind, relying exclusively on the Apple Watch and the company's wireless headphones, AirPods, that were introduced last fall, said Mr. Moorhead.

The company said Apple Watch sales rose 50% in the quarter ended in June, however, it hasn't broken out sales of the product. In May, Chief Executive Tim Cook said watch and headphone sales combined for the year ending in March would equal about $5 billion.

In June, Apple introduced a new operating system known as watchOS 4. The system, which will be available this fall, includes a redesigned music app and a Siri watch face that displays personalized information.

Write to Tripp Mickle at Tripp.Mickle@wsj.com and Ryan Knutson at ryan.knutson@wsj.com

(END) Dow Jones Newswires

August 04, 2017 19:52 ET (23:52 GMT)

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