Verizon Communications on Friday revealed that it sold 2 million iPhone handsets during the third quarter of 2011, 700,000 fewer than top rival AT&T. Verizon reported its third-quarter earnings on Friday and during a conference call with analysts, the carrier revealed that it sold 2 million iPhones last quarter. AT&T on Thursday reported that it activated 2.7 million iPhones during the same quarter, 35% more than Verizon. AT&T of course, had a steep advantage that has grown even more substantial following the introduction of Apple’s iPhone 4S. During the third quarter, Verizon Wireless sold a $199 iPhone 4 with 16GB of storage and a $299 iPhone 4 with 32GB of storage. AT&T offered the same two models along with a less expensive iPhone 3GS that the carrier says was very popular. In the fourth quarter, Verizon and AT&T will both offer a $99 iPhone alongside three iPhone 4S models, but AT&T also now has a free iPhone 3GS to give away on contract. Verizon blamed next-generation iPhone rumors for slowing iPhone 4 sales during the third quarter.