iPhone Hits The UK W/High Profits for Apple
09.19.07 - 04:16pm
The deals Apple is making with cell phone carriers that carry the iPhone are a first in cell phone history. Steve Jobs negotiations are legendary and he is proving his worth by creating deals that are sure to give Apple unprecedented profits in the cell phone market.
The 02 is giving Apple as much as 40% of any revenues it makes from customers’ use of the device. 02 will also be giving revenue to Carphone Warehouse, the company which has exclusive rights to sell the iPhone on behalf of 02.
Ben Wood, director of telecom research company CCS Insight said that 02 is gambling on the iPhones ability to draw new customers. Wood said, “O2 “stated today they were prepared to change the business model for this one-time opportunity.” In addition to revenue from the sales of the iPhone itself, Apple will receive a 10 percent cut of the subscription and usage fees.
“I can’t imagine any of the operators agreeing to terms like that,” said one UK telecom official. “It is an extraordinary number.”
The iPhone is pretty much guaranteed to sell well in the UK, but whether or not users will use the 02 network is yet to be discovered. Hackers have already unlocked the iPhone and as 02’s EDGE network only cover 30 percent of England, there are a lot of people who want the iPhone who will have to rely on hacks to unlock the phone. Many are already using it in the UK on various networks, having bought the iPhones in the U.S. at launch. Even with the 7,500 Wi-Fi hotspots 02 is offering for free it still has a way to go to develop a network that is reliable across the country. While Apple will still profit from the hacked phones 02 will not.
AT&T was heavily lambasted as the weak link in the chain when the iPhone started shipping in the US earlier this year. O2 looks to be heading for the same fate here,” said Martin Garner, director of wireless intelligence at Ovum. “O2 said that its research shows that up to two thirds of iPhone usage would be on Wi-Fi either at home or out and about… Certainly the [hotspot] deal with The Cloud is good for users and will help in urban areas and in people’s houses, but it will not mean much in rural areas.”
The iPhone faces much stiffer competition in Europe and whether it will take off the same as in the U.S. will be something we will find out on November 9th, the UK launch date. UK users are used to getting their phones for free, and they already have access to new smart, fully web access cell phones that companies such as Nokia have launched.
“Being asked to pay 270 pounds for a phone, even a very smart phone, will be a culture shock,” said Chris Green, editor of IT Pro, a trade magazine. “But given the Apple brand I think they might be able to get it to work.”
In spite of the much higher competition Wood still thinks it will do well saying, “There’s no doubt this will be one of the hottest consumer electronics items out there this Christmas. It’s a ‘wow’ product.”
As far as the people in Europe being used to getting their smart phones for free, subsidized by the company, Steve Jobs simply said, “Sometimes you get what you pay for too.”
Speak Your Peace