iPhone business model faces growing threat in Europe: analyst

Stan Beer
Wednesday, 28 November 2007 05:30

IT Industry - Strategy

Apple's iPhone business model, which ties the sale of the popular handsets to an exclusive carrier for each country in which they are sold faces a growing threat in Europe from a variety of sources, according to a leading European based telecommunications analyst.

According to Vincent Poulbere, senior analyst at UK-based research group Ovum, threats to the iPhone business model in Europe are likely to come from both regulatory and non-regulatory sources.

Apple has kicked off its iPhone program on the Continent with T-Mobile in Germany and Orange in France and has already run into regulatory problems, with Vodafone successfully being granted an injunction forcing T-Mobile to sell unlocked phones in Germany.

Mr Poulbere sees this as a sign of further trouble down the line for Apple in 2008.

"The multi-year exclusivity of the iPhone distribution, which is at the heart of the business model, is increasingly jeopardised," Mr Poulbere says.

"First, by the legal framework which obliges to sell an unlocked iPhone - price still undisclosed - and second, by the relative easiness for hackers to unlock the phone - various sources mention already 5 to 10,000 users of unlocked iPhone in France."

Mr Poulbere concedes that Orange estimates of selling 100,000 iPhones within 1 month, between the official launch starting from tomorrow evening and the end of the year, are probably on the mark. However, he believes a not so happy story for Apple will unfold in 2008.

"We see the iPhone finding more difficult market conditions in Europe than in the US," Mr Poulbere says. "There are two key reasons for this:

"- first, at €399 the iPhone will be seen as expensive in a market where handset subsidies are the rules of the games. Around 80% of mobile phones are sold in France at prices under €100.

"- second, there is a compelling competitive reaction to the iPhone launch. We commented a few days ago about SFR's launch of 'Illimythics', which introduces 6 new devices in the iPhone's segment in combination with unlimited Internet subscriptions, with an attractive pricing.
 
"We'll also see next year how the relation between Orange and Apple evolves. It could be tumultuous."
 
In Fance, the iPhone will be sold at €399 in combination with Orange's subscriptions starting at €49/month for 24-month engagement including 2 hours communication, unlimited Internet access, 50 SMS and 10-hour WiFi access in Orange's hotspots. Subscriptions will also be available with 12-month engagement for 4.5/month more.