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The true impact of the iPhone across more networks in UK

As the UK prepares for 2 more networks starting to sell the iPhone 3G and 3GS at the end of the year (start of 2010 for Vodafone) we have looked at the true impact of this move away from exclusivity and who will truly be the winner from this deal.

With both Orange and Vodafone announcing their iPhone deals with Apple within 24 hours, last week truly changed the future landscape of the mobile phone market in the UK. Up until this point O2 has had the exclusive right to the Apple iPhone for two years, stealing customers away from their competitor networks thanks to the revolutionary iPhone. Vodafone themselves admits that they might have lost over 150,000 customers to O2 just because of the iPhone, which with an average annual earning per customer of £420 (based on a £35 a month contract) equals a whopping £63 million. Now such a number makes a significant impact on any bottomline, which is why Vodafone, and Orange, has both been lobbying hard to get Apple to open up the market in the UK.

The move from Apple to sell the iPhone 3GS across more than one network in the UK did not come as a surprise though as the popularity of the iPhone has grown the exclusive deal has limited the market potential of the iPhone, and limited to earning potential for Apple from all their other associated services, such as iTunes Store and the iTunes App Store, which already have seen over 2 billion apps downloaded. With Orange announcing iPhone deal and then Vodafone announcing their iPhone deal the following day, Apple has secured coverage from the top 3 mobile networks in the UK. And the potential is even bigger as Orange and T-Mobile are in talks of merging in the UK,  making them the largest mobile operator in the UK market.

So what is the impact of this for the parties involved, and not to mention for you the mobile phone user. Will the move from Apple result in a price war on the iPhone between the 3 networks? Will it give us improved network coverage? or is the true winner the corporations themselves that are involved in this deal? We have looked at what might happen next, and who we see as the clear winner from this deal.

In the wake of the Orange and Vodafone iPhone announcements there has been a lot of speculation about it opening up for a potential price war between the mobile operators as the fight for the iPhone hungry consumers intensify. However it seems to be the consensus amongst experts and analysts that although price reductions are expected, it is not likely that we will see a full out price war between the networks. In the long run a price war is damaging for all parties involved, and especially considering the the high fee the networks have to pay Apple for each iPhone sold, cutting their own margins to the bone. Until Orange and Vodafone announces their priceplans we will just have to wait and see what happens.

Should there be a price move, we might also see that it does not come from the new entrants, but perhaps from O2 as the already established provider. Orange is expected to have an advantage through having a more developed 3G coverage, and should the merger with t-mobile come in place that network will be further improved. O2 has received criticism before for their 3G network, which even in larger cities can sometime be limited with slow speeds.

The good thing, besides the potential for lower prices coming from all this, is that the networks will have to pick up the slack and improve the overall service to the iPhone customers, which also means improved service for all smartphone and other mobile phone customer across networks. We might be starting to see the wider ripple effects of the iPhone and the smartphone revolution.

It will be interesting to see the strategy that each of the networks will implement in terms of their marketing and positioning. At the moment the one with a slight advantage is probably Orange, which already have a well established brand through their tv ads and their Orange Wednesdays deals with cinemas across the country. They might be able to find new ways to leverage that relationship through the iPhone as well, in terms of delivering unique content.

Although the customer is likely to get a better deal out of the increased competition, Apple themselves are the clear winners from opening up their UK market model, leveraging the popularity of the iPhone and their wider business model focusing on delivering an increasing amount of content and functionality directly to their iPhone customers. In addition to the about 1.5 million or so iPhone customers through O2 in the UK, Orange has already seen a massive 125,000 pre registering their interest in the iPhone, a week after the announcement, showing the massive market potential there still is for the iPhone in the UK. The combination of the fee from the networks for each iPhone sold (reported to be around £200) and the increased earnings from the associated iTunes Stores, Apple might be laughing all the way to the bank. Not to mention what Orange and Vodafone might have spent to “butter up” Apple to get their share of the iPhone market.

One thing is for sure, being in Apple’s shoes must be quite nice these days. While we wait for Orange and Vodafone to announce their iPhone deals, you can always check our iPhone 3GS buying guide.

For our US readers, hopefully we will soon see an end to the AT&T exclusivity as well and get true market competition on the iPhone in the US as well.

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One Response to "The true impact of the iPhone across more networks in UK"

  1. Misty Mays says:

    I love the I phone it’s the best phone ever!

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