10/1/2009 5:56:00 PM
Price war looms over iPhone
The cost of contract smartphones could increase in the UK if a price war erupts between operators over the iPhone.
Analysts are warning that operators will have to increase subsidies on the Apple smartphone as they fight to attract customers with lower prices. Meanwhile, the cost of other handsets will have to rise as a result.
Orange announced on Monday (28 September) that it had secured the rights to distribute the iPhone before Christmas, while Vodafone announced on Tuesday that it had secured a similar deal for early 2010.
It is expected that 3 and T-Mobile could soon announce deals with Apple.
Strategy Analytics director of wireless practice Neil Mawston said: ‘All the operators will have to do something – the UK is the most important smartphone market in Europe.
‘The biggest issue will be that subsidy budgets will be ramped up. You could see subsidies moved from other vendors, such as RIM, HTC and Samsung, which will increase the prices of their handsets.’
Meanwhile, O2 is understood to have been hit hard by Apple’s decision to remove its exclusive rights on the iPhone after two years. It is thought the network will now look at alternative devices, such as the Palm Pre,
to boost revenues.
Mawston said: ‘Subsidies going up may benefit O2, but the operator could also be forced to raise them on the iPhone.’
Geoff Blaber, CCS Insight analyst, said operators may reduce subsidies for other handsets to off-set the cost of subsidising the iPhone. He added: ‘However, as this could impact on volume sales, it is more likely that operators’ portfolios will contract, or they will follow O2’s example from the end of 2008 and actively encourage subscribers to delay upgrading until the New Year, when they have more money.’
Orange, which has not yet revealed tariffs on the iPhone, would not comment but said: ‘It is business as usual on all of our devices.’
Vodafone declined to comment.