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iPhone Sales Shift to Multiple Mobile Operators

Posted on: Wednesday, 7 May 2008, 06:00 CDT

Facing a slowdown in global sales of the iPhone, Apple has changed its marketing strategy by agreeing to sell the device through two mobile operators in Italy after previously relying on exclusive deals with single operators in other countries.

Vodafone, the world's largest mobile phone operator, and Telecom Italia Mobile, the leader in the Italian cellphone market, said they had reached agreements with Apple to sell the multimedia telephone. Vodafone also said it would sell the iPhone in nine other countries: the Czech Republic, Greece, Portugal, India, Egypt, Australia, New Zealand, South Africa and Turkey.

"It was going to be difficult for Apple to continue on an exclusivity basis," said Carolina Milanesi, the research director for mobile devices at Gartner in London. "Opening up to more operators will widen their addressable market and therefore their overall sales potential."

According to two people with knowledge of the situation, in June Apple plans to start selling a long-awaited faster version of the iPhone in Italy that works on third-generation, or 3G, mobile networks. The faster networks typically cut download times for music, video and Internet browsing to less than one-third the time needed on networks used by the existing iPhones.

Neither Apple nor its partners have disclosed the timetable for introducing the 3G phones in any market.

Apple, Vodafone and Telecom Italia declined to comment on whether their agreements covered a 3G iPhone. Except for Egypt, India and the Czech Republic, Vodafone operates 3G networks in all of the countries in the new distribution agreement. Telecom Italia's TIM also has a 3G network.

The new sales strategy in Italy, analysts said, could be the forerunner for a broader iPhone distribution in other markets.

Until now, Apple has used exclusive partners in Europe and the United States. O2, owned by Telefonica in Spain, has sold the device in Britain and Ireland, France Telecom in France and Deutsche Telekom in Germany and Austria. Under these deals, operators have agreed to hand over to Apple a percentage of revenue from the use of mobile data services.

An Apple spokesman in London, Alan Hely, said that Apple currently had no agreements with other mobile operators in the nine countries, other than Italy, where Vodafone will be its sales partner.

Neil Mawston, an analyst at the research firm Strategy Analytics in Milton Keynes, England, said that Apple's decision to change course in Italy meant that the U.S. company might also use multiple partners in other markets, which could revive sales.

Global shipments of the iPhone declined to 1.7 million in the first quarter from 2.3 million in the fourth quarter, Strategy Analytics said. Mawston said iPhone sales in Europe have been held back by the price of the device - as much as euro 499, or $776, in Germany and France - a reliance on slower networks and the exclusive sales arrangements.

Apple has not reported its European sales figures.

The iPhone's share of the global cellphone market fell to 0.6 percent in the first quarter from 0.7 percent in the fourth quarter, according to Strategy Analytics, a research firm.

"The main issue for Apple had been that it was basically a high sticker price for a relatively slow GSM handset," Mawston said. "The agreements with Vodafone and Telecom Italia are a major expansion for Apple's iPhone distribution and something that was critical to developing sales. The Italian arrangement is an admission by Apple that its strategy of using one operator in each national market has not been working as it expected."

Source: International Herald Tribune

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