Apple iPhone price war looms, warn analysts

Apple iPhone price war looms, warn analysts

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.

Written by Mobile Today
Mobile Today


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