After months of speculation and hype, Apple's iPhone has finally hit the UK and German stores. The question is, what does it mean for its operator partners, O2 UK and T-Mobile Germany‾
O2 currently leads the UK in terms of connections and in terms of ARPU, and has reported the highest non-voice ARPU for several consecutive quarters. As such it is a good fit for a device such as the iPhone that focuses so heavily on messaging and Internet services. O2 is offering the iPhone with an unlimited mobile data tariff, and we would argue that this is a great way for it to raise awareness of mobile data tariffs among its customers.
Even if they do not buy an iPhone, the buzz surrounding it may arouse their interest in the mobile Internet. However, we think the strongest benefit for O2 is that the iPhone acts as a key differentiator in a market that has recently seen fierce competition in acquisition and retention.
The relatively expensive contracts on offer with the iPhone will represent an attractive revenue stream over 24 months, but the high up-front and monthly costs and the long lock-in could put off some users in a market where free handsets are the norm.
In addition O2's EDGE coverage in the UK is currently at a rather woeful 30%, and although it has pledged to increase this, it will take both time and a considerable investment. When you consider that sales and support investment will also be needed, it is taking quite a gamble on the iPhone's success.'
T-Mobile has come under considerable pressure lately in the German market. The last two quarters have seen slowly growing customer numbers but declining revenues year-on-year, and it faces strong competition in all segments of the market. Close competitor Vodafone has crept past it in the postpaid segment, with a higher ARPU and higher non-voice revenues.
As such, it needs to fight back, and the iPhone may well allow it to do so. Not only does this put it back in the headlines, it offers it the opportunity to use its EDGE network (with 100% coverage) to its fullest potential, and generate a decent ROI. This should also drive up acquisitions of high-value customers, something we believe it needs to focus on. As in the UK, the iPhone should help drive its Web N Walk mobile data business, and it is also able to leverage its many WiFi hotspots in Germany.
Both O2 and T-Mobile will need to ensure they derive the maximum benefit from the initial burst of momentum the iPhone launch provides.