Apple's Playing The EuroOperators For Fools

Rumours in the press are rife today that Apple is going to pick as its initial launch partners: O2 in the UK, T-Mobile in Germany and Orange in France. Personally, I think the whole saga runs the risks of undermining the three most vital mobile strategies which have underpinned their "return to growth" story since most European mobile markets have become saturated:

1. Pan European Efficiencies

Most mobile operators have spent many billions claiming that economics of scale and European reach is vital – the Apple deal makes this argument look ridiculous.

Furthermore what o2 will gain in the UK will be offset by losses in Germany; what T-Mobile gains in Germany will be offset by losses in the UK; and what Orange gains in France will be offset by losses in the UK.

Of course, it is not a zero sum game and the biggest "loser" will be Vodafone, so the rest will be happy.

2. Shift in Value Chain

Most operators have been fighting for an ever big share of the mobile value chain: for instance keeping third party retailer commissions under control and keeping handset manufacturers out of the mobile services market.

The Apple deal fundamentally undermines this model with distribution only available via Operator and Apple stores; Apple taking a share of ongoing revenues; and probably leading to overall higher industry network churn.

Of course, it is not a zero sum game and the biggest "loser" will be the independent retailers, so there is a crumb of comfort to the operators.

3. Undermines Advanced Wireless Network Services

Worst of all for the Mobile Operators is that the iPhone uses the slow as a snail EDGE network, prefers WiFi connections for internet access and prefers, pardon the swearing, physical cables for side loading of content.

What was the rationale for pumping many billions into 3G networks again?

Conclusion

I think it ridiculous that a whole industry would undermine its fundamental strategies with a short term panic reaction to a trendy handset.

But there you go…

Comments

[peter02l:]

I'm afraid the only way to reach your conclusion in the first two points is for the mobil phone operators and the retail market to be a zero sum game.

2007 Jul 05 02:59 PM

[John Lazerow:]

it's probably foolish to believe there won't be a 3G variant when iPhone launches in Europe. and never underestimate the value of the end user experience.

2007 Jul 05 03:50 PM

[carleast:]

And that's no doubt why Vodafone lost the contract. They probably didn't want to budge on their terms where as the others are like dogs who will do anything to please their owner. Good on Vodafone I say. How much do you really think that it will effect their bottom line? Especially as we don't know how much Apple are getting from O2.

2007 Jul 06 06:46 AM

[econgdon:]

you couldn't have an efficient overseas 3G iPhone performing better than the USA version .. There would be no way that a "stars and spangles" company would try to make its overseas version more efficient than a home one that had to cope with the clumsy USA telephone mobile sytem. What would the vested interests say ??? Roll over inches, pounds, miles, farenheit, NTCC and so on...

2007 Jul 06 09:41 AM

[Alan Williams:]

Some would say, as far as the consumer is concerned, that the mobile phone network operators have way too much power over both the handset manufacturers and the cell phone users. Handset innovation has definitely been stifled by operators turning off certain options and monetizing every aspect of the cell phone. How many cell phones have WiFi? That capability could have been in cell phones for a few years. Why can't you make and download your own ring tones? That capability has been available for a couple of years as well.

I say bravo to Apple for forcing their partners out of the cell phone consumer dark ages and giving cell phone users what they want, not what cell phone carriers want them to have. Apple is dragging the operators, kicking and screaming, to the holy grail of consumer sales, customer satisfaction.

Everyone will win in the long term.

2007 Jul 06 05:11 PM

[econgdon:]

Alan I have friends who not only create their own tones but have the voices of their friends sayin "answer the phone" in the voice of the person ringing !! This is in Thailand, ... Cant you do that in the USA? I think it more a function of the phone than the carier. Secondly I suppose that you could have WIFI as an option as well as conection to the internet via G3 but why? WiFi is stone age in comparison.. its a cellular system ...The common use of the mobile is relatively new in the USA but you never upgraded your system which was made for bricks. Now you have a lovely looking phone, well designed with enhanced features, and user friendly interface like the mac has, but the features themselves are not unknown ones internationally, but Apple has made them user friendly like its computers, but the phone been held back by your system... just as macs have been held back by lack of access to windows based software, but this is cahnging and the flight will be in droves. I do hope the intenational version is just that and up with the latest technology.. and not held back by the equivalent of "windows" in the international world...go to Japan, or better still ... Romania and use the internet system.. you will be amazed !!

2007 Jul 06 09:14 PM

[John Scott:]

Zero sum game? Trendy handset?

Take a peak from under that rock. The world is changing.

2007 Sep 01 05:06 PM