Orange’s
deal to supply the Apple iPhone, breaking O2’s UK exclusivity on both the 3G and
the 3GS handsets, is likely to trigger a price war, according to industry
analysts.
John Strand
of Strand Consult said: ‘The deal is in line with Apple’s distribution strategy
which is to increase its distribution power. But it leaves O2 and Orange to battle it out
as to who can offer the cheapest iPhone. This will trigger a price war. The
only winner will be Apple.’
Strand
pointed to Denmark
operator Telia, which, like O2, had an exclusivity deal on the iPhone.
‘The big
question is can O2 keep its customers? And how will it do that? When Telia lost
its iPhone exclusivity deal in Denmark,
it discounted its existing contracts by between 30% - 40%. We could see a
similar strategy in the UK,’
Strand commented.
Geoff
Blaber, analyst at CCS Insight, said Orange
would need to apply competitive subsidies to gain market share. ‘O2 has had the
iPhone for a long time and Orange will not get
anywhere near the same increase in subscriber growth as O2 unless it can price
it more competitively.’
Blaber did
not forsee a mass migration of O2 subscribers to Orange, in the short to medium term. Most are
tied into long term 18 month to two year contracts, many of which will have
been recently renewed,’ he explained.
However Orange could be squeezed,
warns Blaber. ‘Orange will have to apply a bit
more subsidy and make it available on lower priced tariffs – but is that
affordable with the rise in Orange’s
acquisition costs?’
Neil Mawston,
director at Strategy Analytics, said the deal would impact most severely on
other handset manufacturers. ‘This will put other handset vendors such as
Nokia, Samsung and LG under competitive pressure but particularly the less
established smartphone vendors such as HTC could come under pressure from this.’
Blaber
questioned the deal’s impact on Motorola’s Dext, due to be launched before
Christmas. ‘That is a tough environment and it is interesting that Dext is
available on Orange in the UK,’ he said.