9/7/2009 11:24:00 AM
Apple iPhone bad business for operators, says report
The Apple iPhone has failed to increase its operators’ market share, revenue or earnings, according to a damning report published this week by media consultant Strand Consults.
The report claims that Apple is using O2 and other operators as ‘naïve friends’ rather than partners to advance its worldwide sales of the iPhone.
But relations may soon turn sour, the report warns, as operators recognise the iPhone as a ‘baby cuckoo’ which demands a disproportionate amount of investment for disappointing returns and to the detriment of operators’ core products.
The report ‘The Moment of Truth – a portrait of the iPhone’ uses data from more than 100 operators across the world to question whether the iPhone creates any shareholder value for the operators. It concludes it does not. ‘On the contrary, some operators have sent out profit warnings, because of the iPhone, for example, AT&T and SingTel,’ the report says.
The report points to diminishing returns for iPhone operators as their exclusivity deals run out and Apple moves to broaden its distributor base. It warns that as distributors increase, so will competition, forcing prices even lower.
Operators will be left scrambling for market share ‘in a niche segment with a niche product’ that has lost is exclusive appeal, the report warns. Meanwhile Apple will continue to rake in profits generated by the iPhone, it predicts.
The report also challenges the view that iPhone brings operators new customers. The iPhone ‘is helping stimulate operators’ churn on their own customer base - and thereby negatively influencing their business case’, it claims.
In addition, the report claims iPhone customers are ‘very loyal’ towards Apple but happy to switch operators for better iPhone deals.
The report recommends both parties move swiftly to improve their business relationship, warning that Apple could lose out badly if it loses operators’ loyalty.
It advises operators to place more demands on Apple by asking for revenue share of Apple’s app store and by asking Apple to implement operator billing. It also recommends operators reduce or discount subsidies; analyse the iPhone market more closely; consider selective distribution of the iPhone; and recognise the competitive threat MVNOs pose.
The report warns Apple that it must radically change its strategy or lose operator loyalty. ‘In Apple’s world currently there are three partners; Apple, Apple and Apple’, it says.
It recommends Apple offers wider distribution on existing markets; launches more products; is more open by improving dialogue with the distribution channels and gains a better understanding of the operators’ business case.