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Thursday, July 05, 2007

Apple Plays the EuroOperators for Fools

Rumours in the press are rife this morning that Apple is going to pick as its initial launch partners: O2 in the UK, T-Mobile in Germany and Orange in France. Personally, I think the whole saga runs the risks of undermining the three most vital mobile strategies which have underpinned their "return to growth" story since most European mobile markets have become saturated:

1. Pan European Efficiencies

Most mobile operators have spent many billions claiming that economics of scale and European reach is vital – the Apple deal makes this argument look ridiculous.

Furthermore what o2 will gain in the UK will be offset by losses in Germany; what T-Mobile gains in Germany will be offset by losses in the UK; and what Orange gains in France will be offset by losses in the UK.

Of course, it is not a zero sum game and the biggest "loser" will be Vodafone, so the rest will be happy.

2. Shift in Value Chain

Most operators have been fighting for an ever big share of the mobile value chain: for instance keeping third party retailer commissions under control and keeping handset manufacturers out of the mobile services market.

The Apple deal fundamentally undermines this model with distribution only available via Operator and Apple stores; Apple taking a share of ongoing revenues; and probably leading to overall higher industry network churn.

Of course, it is not a zero sum game and the biggest "loser" will be the independent retailers, so there is a crumb of comfort to the operators.

3. Undermines Advanced Wireless Network Services

Worst of all for the Mobile Operators is that the iPhone uses the slow as a snail EDGE network, prefers WiFi connections for internet access and prefers, pardon the swearing, physical cables for side loading of content.

What was the rationale for pumping many billions into 3G networks again?


I think it ridiculous that a whole industry would undermine its fundamental strategies with a short term panic reaction to a trendy handset.

But there you go…