After enduring months of rumors about competition for the iPhone, AT&T Inc. executives are finally about to face their moment of truth.

On Tuesday, Verizon Wireless is expected to announce that it is getting the Apple Inc. phone around the end of the month, people familiar with the matter have said, ending AT&T’s three-and-a-half-year exclusive run with the iconic device.

The announcement will kick off a battle as the two carriers fight to lure defectors and win over new customers. AT&T is expected to run new ads that will highlight what the carrier says are the iPhone’s greater speed and better functioning on its network, a person familiar with the matter said.

Verizon Wireless declined to comment but has previously said its network is more reliable.

Beyond marketing, AT&T has taken other steps to prepare for losing exclusivity. It beefed up its investment budget last year to improve the quality of its oft-criticized network, rolled out a slate of new devices, cut the price of older iPhones and accelerated upgrades to new iPhones to lock more customers into long-term contracts.

Ralph de la Vega, chief executive of AT&T’s wireless business, said the company has been preparing to lose its exclusive hold on the iPhone for a number of years and welcomes the competition.

“We are ready for it,” Mr. de la Vega in an interview Monday. “The short- and long-term viability of AT&T will be good whether we have exclusivity or not. We are much bigger than this.”

Last summer, when Apple released the iPhone 4, AT&T allowed any iPhone customer who would be eligible for an upgrade at some point in 2010 to immediately trade up to the new device as long as they signed up for a new two-year contract.

The tactic appears to have had some success. Credit Suisse estimates that AT&T will have 18.4 million iPhone subscribers at the end of 2010, of which 15.9 million, or 86%, will be under contract.

Sales estimates vary, but analysts think Verizon will likely sell seven million to 13 million iPhones this year.

Credit Suisse analyst Jonathan Chaplin estimates Verizon will sign up 9.6 million iPhone subscribers through 2012, and that 1.3 million of them will be defectors from AT&T, which had 67.7 million contract subscribers at the end of September.

A Consumer Reports survey last year ranked Verizon first and AT&T last in terms of network quality for major carriers.

(Source: WSJ)