iPhone finally reaches 1 million mark in U.K.
It took 16 months, but O2 UK, Telefonica's (TEF) British subsidiary, managed to sell its 1 millionth Apple (AAPL) iPhone before its parent company released its 2008 earnings report Thursday.
But as several news sources (here, here) were quick to point out, Nokia (NOK) a year earlier managed to reach the same milestone in less than half the time, selling 1 million N95 smartphones in the U.K. in just seven months. (link)
"iPhone sales are continuing to accelerate," said Matthew Key, CEO of O2 UK. Despite the dismal economic climate, the division's annual sales were up 10.6% in 2008, thanks in large part, said Key, "[to] the success of our products at the top end of the market, including BlackBerry and iPhone." (link)
Telefonica's worldwide sales were up 6.9% for the year, led by growth in its Latin American (12.9%) and European (5.9%) divisions.
Although it has been since eclipsed — at least in the eyes of the British press — by the iPhone and its imitators, the N95 was considered a breakthrough smartphone when it was released in March 2007 to rave reviews. The Register named it one of the top products of the year. ("It's the Swiss Army Knife of mobile phones: a compact handset that does everything.") (link)
The N95's suggested retail price at launch was 549 pounds ($780), but by the time the iPhone arrived in November 2007, the Nokia was being heavily discounted. It's now bundled into a wide range of service contracts that throw in the device for free.
The iPhone is also available for free in the U.K. with a monthly 45-pound ($64) tariff. See here for O2's current rate plans.
By the end of 2008, Apple had sold 17.38 million iPhones worldwide.
See also:
iPhone finally reaches 1 million mark in U.K.
It took 16 months, but O2 UK, Telefonica's (TEF) British subsidiary, managed to sell its 1 millionth Apple (AAPL) iPhone before its parent company released its 2008 earnings report Thursday.
But as several news sources (here, here) were quick to point out, Nokia (NOK) a year earlier managed to reach the same milestone in less than half the time, selling 1 million N95 smartphones in the U.K. in just seven months. (link)
"iPhone sales are continuing to accelerate," said Matthew Key, CEO of O2 UK. Despite the dismal economic climate, the division's annual sales were up 10.6% in 2008, thanks in large part, said Key, "[to] the success of our products at the top end of the market, including BlackBerry and iPhone." (link)
Telefonica's worldwide sales were up 6.9% for the year, led by growth in its Latin American (12.9%) and European (5.9%) divisions.
Although it has been since eclipsed — at least in the eyes of the British press — by the iPhone and its imitators, the N95 was considered a breakthrough smartphone when it was released in March 2007 to rave reviews. The Register named it one of the top products of the year. ("It's the Swiss Army Knife of mobile phones: a compact handset that does everything.") (link)
The N95's suggested retail price at launch was 549 pounds ($780), but by the time the iPhone arrived in November 2007, the Nokia was being heavily discounted. It's now bundled into a wide range of service contracts that throw in the device for free.
The iPhone is also available for free in the U.K. with a monthly 45-pound ($64) tariff. See here for O2's current rate plans.
By the end of 2008, Apple had sold 17.38 million iPhones worldwide.
See also:
Finally, the real iPhone
There’s a theory favored by savvy Apple watchers that the first generation iPhone — greeted with such hoopla last year — was not actually the real thing.
That iPhone – the one that hundreds of thousands of Americans queued up to buy for up to $599 apiece, the one that Time magazine named the Invention of the Year, the one that six million people purchased before Apple finally stopped making them in May – was just a trial balloon floated by Steve Jobs to test the airwaves.
According to this theory, the real iPhone – the one aimed at the broadest possible market here and abroad — would start at $199, the magic price point at which consumer electronics devices seem to take off and become mass market phenomena. It would have built-in GPS location tracking, "push" e-mail, and wireless syncing with corporate enterprise networks. Most important, it would run hundreds of third-party applications available through an online App Store and operate over so-called third generation (3G) cellular networks that are two to five times faster than the one used by that first, prototype iPhone.
If this theory is true, then the real iPhone era begins on Friday, July 11, at 8:00 a.m.
That's when the iPhone 3G goes on sale at Apple (AAPL) and AT&T (T) outlets in the United States and at the stores of Apple's cellular partners in some 20 other countries around the world. (Strictly speaking, the era begins early Thursday, when the device goes on sale at 12:01 a.m. New Zealand time. Given how the Earth turns, that corresponds to 8:00 a.m. July 10 at Apple's New York City flagship store and 5:01 a.m. at its Cupertino headquarters.)
Some things about the new iPhone haven't changed. Physically, it's almost identical to the first. Same touch screen, same dimensions — except for the back, which is slightly bulgier and made of black plastic instead of metal.
Conceptually, it's still one device that combines three of today's most popular technologies — cellular communications, portable digital music and wireless access to e-mail and the World Wide Web.
And the fundamental breakthrough is the same: unlike most devices that combine several functions and do none of them well, the iPhone puts together three must-have functions and does at least two of them better than they have ever been done before.
Early reviews suggest that the one thing the first iPhone was not particularly good at — telephony — is much improved in the second version, thanks to a redesigned audio system and, perhaps, improvements in AT&T's network.
There's still no physical keyboard, so devotees of RIM's (RIMM) BlackBerry who were turned off by the lack of tactile feedback when dialing or texting on the first iPhone are not likely to be turned on by the second. The battery is still not user-replaceable, a shortcoming that may be even more important this time given the power demands of operating at 3G speeds. (One early reviewer who was getting nine hours of Internet use on the first iPhone clocked less than six hours on the second. See here.)
The built-in camera is the same under-2 megapixel device that can't do video. There's still no way to cut and paste text. And you are still married to AT&T's cellular network for the life of a two-year contract, at least in the United States. In fact, the bonds of that matrimony may be even stronger this time around, given the way AT&T has set up the in-store activation procedure, and will cost U.S. customers at least $10 a month more.
There are many small improvements. You can search address books, delete e-mails en masse, set parental controls and save e-mailed photos. (These improvements will also be available to owners of the original iPhone as part of a free software upgrade.)
Investors will note that Apple has made major changes in its business model. Rather than testing the waters with a handful of exclusive contracts — first with AT&T, then with O2 (TEF) in England, T-Mobile (DT) in Germany and Orange (FTE) in France — Apple has gone global this time, with deals in six of the seven continents and more than 70 countries. To do this, however, it has had to largely abandon the arrangement — unique among cell phone manufacturers — by which carriers sold the iPhone for full price and kicked back a share of their monthly revenue to Apple, which was accounted for in monthly increments over the life of a cell phone contract (usually 24 months).
Steve Jobs was able to dictate these terms — quite advantageous to Apple — because the carriers recognized that being first to sell the iPhone would win them thousands of new customers. In most of the new markets Apple is entering this year, it is acting more like a conventional cellphone manufacturer, taking its (sizeable) profits upfront and letting the carriers subsidize the device with voice and data plans as costly as local market conditions will allow. (See Canada's Rogers Communications (RCI), here for example, to see what kinds of problems this can lead to.) The price of the iPhone itself also varies widely, from as much as $888 for pre-paid phones in Italy to $75 in Mexico and free with certain data plans in the U.K.
Except for those costs, none of this affects the experience of the users.
For them, what will really distinguish this iPhone from the one that preceded it — and from every other smartphone out there — is the flood of software expected to be unleashed when the App Store opens on Friday. Apple has already demonstrated more than a dozen third-party programs for the iPhone, and over the next few months you can expect to hear about hundreds more: business apps that take advantage of the iPhones ability to "push" data down the network when it's available (rather than when it's requested); games that use the device's accelerometer to navigate virtual space; shopping and social networking programs that use satellite tracking to tell you what shops or restaurants and which of your friends (or enemies) are near the spot where you are, right now.
In the end, every successful computing device is ultimately a software "platform," a vehicle for the programs that give it its true value. This is where the real iPhone will stand out, and judging from the interest among the 4,000 third-party developers who have already signed up to write for it, it's got a good headstart.
The iPhone in Hong Kong: A bargain at $24 a month
Even as Canada's Rogers Communications and Germany's T-Mobile compete to offer the worst voice and data plans for the iPhone 3G, Hutchison Global Communications on Monday unveiled what may be the best.
Hutchison (HTX), which stuck a deal with Apple (AAPL) in May to bring the iPhone to Hong Kong and Macau, will be offering customers a choice of two pricing plans:
- 8GB iPhone for HK$2,938 ($377) plus HK$188 per month ($24/month) for 500MB voice and data
- 8GB iPhone for free plus HK$498 per month ($64/month) for 2,200 minutes airtime and unlimited data.
"We believe the (minimum price) plan is comfortable enough for average data users," a Hutchison spokesperson told the Dow Jones Newswire, adding that 500 megabytes will allow users to send 250,000 emails or browse Apple's Web site 2,000 times. (link)
Bottom line in U.S. dollars: Including the cost of the phone, Hong Kong residents will pay between $955 and $1,532 over the life of a 24 month contract.
Some comparisons (all expressed in U.S. dollars for the equivalent of a 2-year contract):
- Hutchison in Hong Kong: $955 (500MB voice and data) to $1,532 (2,200 min., unlimited data)
- O2 (TEF) in the U.K.: $1,698 (75 minutes, unlimited data) to $3,588 (3000 min., unlimited data)
- AT&T (T) in the U.S.: $1,879 (450 min., unlimited data) to $3,318 (unlimited voice and data)
- T-Mobile (DT) in Germany: $1,366 (500MB data) to $3,374 (5GB data)
- Rogers (RCI) in Canada: $1,624 (150 min., 400 MB data) to $2,932 (800 min., 2GB data)
iPhone 3G pricing: U.S. $199, Germany 1 euro, U.K. free
Last week, Steve Jobs announced that in "almost every one" of the 22 countries selling the iPhone 3G on July 11, the maximum price in would be $199 for the 8G model.
AT&T (T) went with the maximum. Some of Apple's (AAPL) international partners are going with the minimum or close to it.
O2 (TEF), which carries the phone in the U.K., announced last week that the iPhone would be free for customers who sign up for one of its higher monthly tariff plans.
And on Monday, T-Mobile (DT) said that it is doing something similar in Germany, selling the iPhone for 1 euro to customers who select its highest monthly plan.
All three carriers are subsidizing the phone, of course, planning to take back in monthly fees more than they give away at point of purchase. In T-Mobile's case, it turns out, a good deal more.
The chart below shows how much customers who buy the 8GB model end up paying at the end of a two-year contract for unlimited data in the U.S., U.K. and Germany. We've used the minimum tariff that yields the maximum subsidy in each country and converted everything into dollars. And we've chosen a two-year period in the U.K., although O2 offers an 18-month contract as well. (E-mail subscribes, click here.)
It should come as no surprise that these European carriers know what they are doing. T-Mobile's 1 euro iPhone may look cheap compared with AT&T's $199, but by the end of their contract, its customers have paid nearly 74% more.
O2's free iPhone, by comparison, is a relative bargain; after two years, it's only 12% more expensive than AT&T's.
Can you trade an old iPhone for a new?
OK, there's a new, faster iPhone 3G coming on July 11. But what about the 6 million people who bought the first one?
That depends when and where they got them.
According to reports Monday in Gizmodo and Ars Technica, citing AT&T sources, U.S. customers who bought an iPhone from Apple (AAPL) or AT&T (T) after May 27 will be allowed to trade it in for a new one with no additional charges (beyond the usual 10% restocking fee).
Customers who purchased an iPhone on or before May 27 are out of luck.
In the U.K., O2 is offering its iPhone customers a better — if more complicated — deal. You have to know what "top-ups" are to understand the terms offered on O2's website here. It's a little clearer as MacWorld UK explains it:
"Existing iPhone customers on the £45 per month contract will be able to upgrade their existing model to the new 8GB iPhone for free on July 11 by visiting the O2 Website. As we reported, you will need to sign up for a new 18 month contract. Existing customers on the £75 per month contract will receive the 16GB iPhone for free.
Current iPhone users on the £35 per month contract will be required to pay £99 to upgrade to the new handset and sign up for a new 18 month contract. They can, however, move up to the more expensive £45 per month contract and get the iPhone for free." (link)
No word yet on trade-ins from Orange in France or T-Mobile in Germany.
Britain's Carphone Warehouse runs out of iPhones
Well, that's one way to clear your shelves of excess inventory.
Eight days after O2 and Carphone Warehouse, Apple's U.K. distributors, tried to rid themselves of unsold iPhones by instituting a 100 pound (37%) price cut on the 8GB model, the extra phones have all but disappeared.
On Thursday, Carphone, Europe's largest independent mobile phone retailer, alerted advertisers that the sale had done its work: the 8GB models were gone and would probably not be replaced. Pocket-lint, a British gadget site, posted a copy of the message:
"Thanks to the most phenomenal response to the promotion, The Carphone Warehouse is now out of stock on the Apple iPhone. Please can you remove all reference to the iPhone promotion in your copy. We apologise for the short notice but would like to thank everyone who participated in the campaign. Carphone do not expect to receive any additional stock at this time." (link)
The news follows a week of intense activity at both Carphone and O2 stores. According to a report last week in Britain's Mobile Today, sales at Carphone's flagship store on London’s Oxford Street had doubled from 30 per day to 60 after the promotion was announced. "We usually sell one or two a day," one staffer told the website, "but yesterday we sold about 20 – it was like launch day again." (link)
8GB iPhones were also sold out last week at O2 stores in Newcastle, Birmingham and London, but O2, the British arm of Spain's Telefónica, hopes to replenish its supply. The 16GB model is selling for full price and is still in stock.
The price cuts were part of a global effort to clear inventory of first-generation iPhones in advance of the so-called 3G iPhone, widely expected to be announced in June — perhaps as early as June 9, according to a CitiBank report issued on Thursday.
Although Apple (AAPL) has been having trouble meeting demand for iPhones in its U.S. stores, sales have been sluggish in Europe. The reaction to the O2 and Carphone promotion suggest that it was price, not lack of 3G connectivity, that was hampering sales — at least in the United Kingdom.
In France, where iPhones have not yet been marked down, it costs 399 euros to buy an 8GB model (VAT included), or $626. As Silicon Alley Insider points out, it's cheaper to ask a friend to pick one up on vacation in the United States, where the same phone sells for for $399, and unlock it.
It's not clear what's going on in Germany, where T-Mobile slashed 8GB iPhone prices 75% to 99 euros ($155), but it still seems to have plenty in stock.
iPhone: European fire sales spreading to France
Hard on the heels of a 75% price cut in Germany and 100 pounds (37%) off in the U.K. comes a report out of Paris that two high-level executives at Orange, the iPhone's wireless carrier in France, have flown to Cupertino to figure out what to do about the excess inventory piling up on their shelves.
Under a headline that reads "L'échec de l'iPhone pousse Orange et Apple à renégocier" ("The iPhone's failure forces Orange and Apple to renegotiate"), Les Echos reports that Orange executive director Louis-Pierre Wenes and marketing director Alice Holzman met with Apple COO Tim Cook earlier this week to hammer out a deal that could lead to a French price cut in the next few weeks.
The sticking point in the negotiations, according to Les Echos: Apple wants Orange to subsidize the cost of the device, as it does all its other models; Orange wants Apple, in return, to sharply reduce or drop entirely the cut it demands of each sale.
The meeting was the latest attempt to sort out the trans-Atlantic inventory imbalance has developed in advance of the second-generation iPhone (or iPhones), now widely expected to arrive in June. While the first-generation continues to sell briskly in the U.S. and has been in short supply in Apple stores for several weeks, European sales are reported to have slowed significantly in advance of the so-called 3G model.
On Friday, the London Times quoted Kathryn Huberty, an Apple (AAPL) specialist at Morgan Stanley, saying that the European carriers had become over-excited by iPhone hype last June, ordered too many, and are now facing "significant" losses on unsold stock.
Apple sold 3.71 million iPhones in the U.S. last year. According to Strategic Analytics, its European partners sold 350,000 through December, considerably less than the 500,000 to 600,000 they had hoped to sell, and only 300,000 in the first quarter of 2008.
Why Apple can't just re-balance its inventory by redirecting Europe's unsold iPhones to Apple stores in the U.S. that could use them is a mystery that has even Apple analysts scratching their heads.
"It remains puzzling that iPhone availability has been very scarce in Apple’s US stores, yet seemingly plentiful everywhere else,” Stanford Bernstein’s Toni Sacconaghi wrote earlier this month. "One explanation might be that because iPhone’s supply shortage came at quarter’s end, Apple chose to ship most of its iPhones to the channel, where units would be recognized as sold during the quarter, rather than re-building inventory in its US stores." (see here)
Is he right? Is Apple manipulating its shipments to dress up its Q2 report? We'll likely find out on Wednesday, when Apple reports its quarterly earnings and releases numbers on its domestic and overseas iPhone sales.
iPhone price cut 37% in U.K. as Apple clears way for 3G model
Two weeks after T-Mobile slashed the price of the 8 GB iPhone in Germany, Britain's Carphone Warehouse and 02 on Wednesday knocked 100 pounds of the price of the device in England, a 37% reduction. The iPhone that sells in the U.S. for $399 now costs (including VAT) $330 in the U.K. and $155 in Germany. Both promotions will end in June.
Meanwhile, U.S. supplies of the iPhone remain tight. Piper Jaffray analyst Gene Munster called 60 Apple stores over the past two weeks and found shortages across the board. Half the stores he checked on Tuesday were out of 16GB iPhones and 82% had limited supplies of the 8GB model.
Munster concludes from the price cuts in Europe that demand for the iPhone there is "light" and that Apple's partners are "draining the channel" ahead of a new iPhone. He believes that the tight supplies in the U.S. indicate that Apple (AAPL) is likely "pacing its remaining supply of phones by trickling units into its retail channel until the new model is released."
Both signs, he writes in a report to clients, point to the June release of a redesigned iPhone with 3G connectivity to coincide with 1) the World Wide Developers Conference that starts June 9, 2) the late-June release of the new operating system and third-party applications, and 3) the end of the European iPhone sale promotions.
Munster speculates that the price of the entry level iPhone will likely remain in the $349 to $399 range. He says iPhone sales probably won't really take off until 2009, when cheaper iPhones become available. Specifically, he expects Apple to introduce an iPhone that costs between $200 and $300 in early 2009, probably at Macworld in January. With cheaper phones and further expansion into Europe and Asia, he's looking for Apple to sell 45 million iPhones in 2009. See here.
iPhone boosts O2's earnings, heads for Ireland
The iPhone has been very good to O2 in the U.K.
Apple's (AAPL) British-accented partner reported yesterday that the iPhone has become its fastest selling device, helping the U.K. division of Telefonica (TEF) achieve its strongest quarter on record. Sales were up 9.5 percent in the last quarter of 2007 — the first to show the effects of the iPhone. O2 did not provide sales figures for the iPhone alone, but it did say that the device helped add 483,000 customers and 276,000 contracts to its roster.
According to O2, the iPhone has the highest satisfaction rating and the lowest return rate of any phone in its lineup. Moreover, iPhone users generate roughly 30 percent more revenue per user than the carrier's average customer.
O2 also announced today that starting March 14, it will be offering the iPhone for sale in Ireland — only the fifth country authorized to carry the phone (after the U.S., U.K., France and Germany). For pricing details, see the Irish Times' report here.
In remarks yesterday at a Goldman Sachs technology symposium, Apple COO Tim Cook said his company will be cutting more deals in both Europe and Asia to reach its sales target of 10 million iPhones in 2008. See Apple's COO calms the waters.
