iPhone Exclusivity: The Beginning of the End?
iPhone exclusivity is rapidly coming to an end. Less than 24 hours after Orange UK announced plans to offer Apple’s iconic handset to its customers “later this year,” Vodafone said that it plans to do so as well. Together, the two carriers will bring to an end a two-year exclusive contract held by rival O2, which overtook Vodafone as the largest mobile network in the U.K. largely on surging consumer interest in the iPhone.
“We estimate that the iPhone represents more than 100 percent of O2 UK’s growth, 6 percent of subscribers, 14 percent of service revenues and 13 percent of earnings before interest, tax, depreciation and amortization,” said Bernstein analyst Robin Bienenstock. “In the UK O2 has consistently taken contract share from competitors (in particular Vodafone) since its sole distribution of this iconic brand began.”
So what will happen now that three carriers will be peddling the device? A price war, most likely. “Research shows that in every country where there is more than one operator selling it, it is cheaper,” Steven Hartley, analyst at technology research house Ovum, told The Telegraph. “It could be very disruptive, but it depends how Orange play it. If they get really aggressive O2 will have to respond and a full-on price war could start.”
A more interesting question to ponder, though, is whether the end of iPhone exclusivity abroad means the end of exclusivity in the states as well. Apple’s (AAPL) contract with AT&T (T) is set to expire as early as next year, but that doesn’t necessarily mean it won’t be renewed–much as customers dissatisfied with the carrier’s network hope it does. By ending exclusivity with AT&T, Apple could offer the iPhone through Verizon (VZ) as well, potentially more than doubling U.S. iPhone sales in the near term. But to do that, the company might have to build another version of the device, which would remove the advantage of manufacturing and supporting a single model per year.