O2 bends over for Apple to secure the iPhone
After months of speculation, the news is out that O2 has won the rights to use the iPhone over its network in the UK - but at a hefty price. According to The Guardian, O2 will give Apple 40% of all revenue it makes from customers using the iPhone.
That's 40% of all call charges, data charges and content downloads that would normally go straight into O2's pocket. No wonder Vodafone walked away from the deal.
More details after the jump...
According to The Guardian, Carphone Warehouse will be drafted in to help sell the iPhone due to its large distribution of stores. T-Mobile will provide the iPhone in Germany, while Orange will provide it in France. However, at one stage all four of the major operators thought they had exclusive rights to it, with Apple playing each operator off against the other in a bid to drive up its share of the revenues.
Obviously, this tactic clearly worked, as the chunk of cash it's getting from O2 is so huge that no other operator can see how they can make money from the device, even over three years.
Worse, O2 has had to spend a huge sum upgrading its network to support EDGE, as the new UK iPhone will not be equipped with 3G, at least initially. As such, the iPhone represents a loss-leading product for O2 that will aim more at increasing the company's user base than generating revenue for it.
Vodafone balked at this early on, and has decided to plough its money into a competitor for the iPhone: the Samsung F700 Ultra Smart, which Vodafone are throwing their considerable weight behind, as well as a new mobile music service they've just launched.
There may be other problems in store for O2 with this deal. The Apple iPhone relies on iTunes, but besides Vodafone, there are a plethora of new mobile music download sites being launched, including one from Nokia, which all run freely on any device, and which are not restricted to the iTunes store. They also enable true over-the-air downloading of tunes, unlike the iPhone, which still requires a PC.
Worse, Apple made the odd step last week of announcing the iPod Touch, which is an iPhone without the phone. This gives people who would balk at the restrictive terms of the iPhone's contract the opportunity to get their hands on the sexy user interface without having to sign up to a long term contract for a phone.
With poor phone features and the lack of 3G, there now seems to be no reason at all to buy an iPhone. Buy an iPod Touch if you want the interface, a Samsung F700 if you want a decent smartphone, and wait and see the horror stories that will emerge next year from O2's finance department!
[Source: The Guardian]
