To have or have not an iPhone in your product mix is becoming less of a dilemma for carriers; what you do with it once you have it is now the challenge. Simon Kearney reports.
The iPhone rush is over. Telecoms research firm Gartner believes those who had to have an iPhone have got theirs and now we are seeing the emergence of longer-term strategies to acquire and hold smart phone subscribers.
“Consumers who wanted an iPhone would have purchased one already,” Gartner research director for carrier operations and strategies Foong King Yew told TelecomTV. “The operators will have to take a long-term view so far as customer value is concerned – subsidies and marketing tend to bring down the margins in the initial stages,” Mr Foong said.
Those fears about acquisition costs have been borne out in SingTel’s latest results. It’s subsidiary Optus in Australia reported a 9 per cent increase in selling costs largely associated with smart phones. SingTel also reported an increase in customer acquisition costs, although it was still able to increase the number of subscribers by 8 per cent and maintain its market-leading position in the city state. Number two player StarHub has followed many other carriers in countries including Britain and now France and included the iPhone in its product mix.
Mr Foonsag said this was about retaining its existing smart phone customers. “The offering of iPhone from StarHub is not going to result in any large gain in new subscribers. Rather, it is to address the demand stemming from StarHub’s own subscriber base and ensure that they don’t churn over to SingTel,” he said.
The carriers face real challenges as the smart phone market changes in front of their eyes. British retailer Tesco has announced it will sell the iPhone while Walmart is planning on selling a Google Android device for around US$30.
Such competition on device sales is the last thing that carriers need.
SingTel reported its device sales were down by 42 per cent year on year in the September quarter. While this is undoubtedly influenced by the global financial crisis it is still sobering.
It is a tricky situation if carriers are being pressured on price by alternate device retailers while being challenged on customer experience by the likes of Apple. “The usage context associated with iTunes and Apple Apps Stores do threaten to push the mobile operators’ brand to the background,” Mr Foong said. “This can be very dangerous to the mobile operators as customer experience and customer intimacy are two key areas one needs to focus on in an increasingly open mobile Internet.”
The revenue sharing details of Apple’s deals with carriers are secret but the overwhelming industry concern is that they favour Apple disproportionately, and reduce the carriers role to being data providers. SingTel’s results again point to the influence of the iPhone in a large increase in mobile date use. “Mobile operators will have to be careful not to be pushed into the position of a bit-pipe provider,” Mr Foong said.
The iPhone was initially released under exclusive deals with carriers in each country where the handset was sold, most notably with AT&T in the United States, whose deal ends in 2010. There is increasing speculation now that Verizon, the largest carrier in the US may have negotiated a deal to sell a hybrid iPhone that will operate on its network. In early November, France’s competition regulator announced that Apple had said it would not give exclusive rights to sell the iPhone in France and Orange had responded saying it would not claim exclusive rights.
Britain already has three carriers offering the iPhone. Singapore will soon have all three carriers offering the handset too.
please sign in to rate this article
45795