Global Economics

Will Britain Take to the Apple iPhone?


The mobile device is about to arrive in the British mass market and could be a hit, but for several reasons analysts are skeptical

There are 50 days left until Christmas -- but only four until this year's hottest stocking filler hits the shops. Apple's long-awaited iPhone mobile device will arrive in the UK on Friday evening. But it remains to be seen whether it will take the market by storm -- or remain a high-end handset with only limited reach.

The iPhone will go on sale at 18:02(GMT) on 9 November across Apple's stores, O2's high street shops and The Carphone Warehouse stores -- 1,300 outlets in all -- as well as online via the trio's websites. It will retail for £269 and there's a minimum 18-month contract. O2 is offering three monthly tariffs -- £35, £45 and £55 -- with varying numbers of inclusive texts and voice minutes.

Unlimited data and wi-fi is offered across all tariffs -- subject to the company's fair usage policy. However, the mobile operator is hyping Friday's launch as the day "the internet fits in your pocket" -- and has now said it will be lifting the usage limits in order to encourage iPhone owners to go surfing.

It said in a statement: "People don't speak in megabites and customer feedback has been that if we say unlimited, it should be unlimited."

For the moment, the company is concentrating on the consumer market and is expecting to sell hundreds of thousands of the sleek touchscreen handsets in the run up to Christmas. And while analysts are in agreement the device is certainly very easy on the eye, they are less certain of the extent to which it will penetrate the mass market -- for a variety of reasons.

Windsor Holden, principal analyst at Juniper Research, sees the device's lack of 3G as a "major handicap" -- and something that makes it the "odd one out" when it comes to high end mobile handsets.

He told silicon.com: "The comparison I make is you say look there's a wonderful sports car, it looks superb, has all the whistles and bells -- and you open the bonnet and it's got a tiny little Robin Reliant engine in it."

Because the iPhone relies on Edge for internet browsing -- along with 7,500 wi-fi hotspots from The Cloud -- download speeds are not as fast as they would be on 3G. And Edge coverage is limited. O2 currently estimates its Edge network covers around 30 per cent of the UK population -- mostly in urban areas. It expects this to grow to around 40 per cent by Christmas.

Holden said: "Most of the handset vendors are anticipating the fact that 3G coverage will increase and virtually all their handsets now have 3G capability. This one doesn't and it's a significant limiting factor as we go down the line.

"Unless and until they rapidly rollout a version of the iPhone that does have that capability I think they're going to come up against a stumbling block which will reduce the opportunities for significant penetration."

He believes "a fair amount of people" will buy the iPhone for the Apple brand, adding "it certainly does look attractive and it's probably a top of the range 2.5G phone". But in Holden's view Apple has missed a trick when it comes to 3G.

He said: "For them to go into what in the UK is a very, very sophisticated mobile market, a saturated mobile market, I think they'll do well but they could have done so much better. They could have really gone to town on this and really put themselves in a very strong position -- had they included 3G. Because at the end of the day now you don't have the download speeds over 2.5G to justify a lot of the applications."

But Jonathan Arber, analyst at Ovum, thinks it's not so much the missed opportunity of 3G that could limit the iPhone's reach in the UK -- but rather its not-so-sleek £269 price-tag.

Arber told silicon.com: "In the UK we're used to a totally subsidised devices. We're used to not paying for our mobile phones and now we're being asked to pay so that's going to be perhaps the key sticking point and I think it will be very interesting to see if consumers are willing to fork out the best part of £300."

He added: "I think it's got a huge amount of brand weight behind it which is certainly gong to drive sales over Christmas. It's probably going to do very well at launch. [But] I think the key question is how big is the overall market...To an extent there's a lot of high end early adopters who will be willing to [buy it] but it's whether it really pushes down into the mass market."

Arber doesn't view the fact the iPhone is only available on one mobile provider as much of a barrier to penetration -- as traditionally UK consumers have "gone more on the device than on the service provider". "When people go to renew their contract what they're really interested in is getting the device they want at the best price," he said.

And when it comes to 3G, Arber said many consumers "still aren't exactly aware what it is" and generally don't make buying decisions based on it. Instead they choose phones because of "attractive features" -- something the iPhone is not short of in his view. However, he warned O2's heavy push to market the phone as a 'pocket internet device' might backfire if users end up being disappointed by the browsing experience.

Arber said: "Once you go outside Edge coverage and you're down to much slower speeds the browsing experience can become quite frustrating and that's something I think they need to watch -- that they don't get consumers expectations too high."

But he added: "I'm not sure yet we've got the perfect mobile web browsing experience [on any handset]."

Provided by silicon.com—Driving Business Through Technology

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