Vodafone and Orange looking for a slice of Apple magic

POSTED BY Global Administrator

It is possible that, over the past couple of years, I may have given the impression that, if Apple’s iPhone wasn’t quite the panacea to end all ills in the mobile market, then it was at least the tonic that the doctor ordered and that the industry badly needed.

Well, I am perfectly happy to continue in that vein today, following the release of three press releases, two from UK operators, and one from good old Apple. To take the operator announcements first: with O2’s exclusive deal in the UK coming to a close in November, its rivals have been anxious to capitalise on the iPhone’s continuing popularity with consumers and to strike a deal with Apple which will give them a share of the iPhone market. This is perfectly understandable: since the iPhone launched in the UK in November 2007, O2 has garnered 60% of net additions to the market, and has also successfully migrated a sizeable minority of its existing user base across to the fairly hefty monthly contracts which the iPhone requires.And so we had the joyous proclamations, first from Orange, then Vodafone, announcing that they too will be getting in on the act.

For Apple, the iPhone has certainly been a substantial moneyspinner, but it has also turned the mobile marketplace on its head, in that the established order – where operator branding and customer control was paramount – was displaced; so powerful was Apple’s product (and, it must not be forgotten in all this, so astute its marketing) that operators having been falling over themselves to offer it within the portfolio, acceding to revenue share and co-branding demands that would have been unthinkable prior to its appearance. For developers, it was like manna from heaven. The QA procedures for the App Store may be rigorous (and in some cases exasperating), but nothing like as arduous (or costly) as having to develop relationships with operators before obtaining the opportunity of placing a product on deck. And there’s the small matter of a greater share of total revenues. Oh, and you get you’re the money for any content that you’ve sold faster with the App Store than via the operators. And you can develop large, attractive, consumer-friendly games and applications. And people can get to them easily. And they play them more. Etc.

Did I say astute marketing? The way in which Apple drip-fed its iPhone across global markets was masterly. Apple cleverly utilised its loyal band of Mac-heads to fuel the initial demand for the iPhone Mark I. But the iPhone Mark I had flaws – for example, where was 3G? Never mind, 12 months down the line, there’s the iPhone Mark II, complete with 3G and a wonderful App Store, which the Mac-heads duly lapped up – as did a steadily increasing wider consumer base. And to tantalise the operators, there was the promise of two-year exclusivity. Now, with the consumer demand firmly established, it’s open season for the operators as regards iPhone – if they agree to Apple’s terms. The result will certainly be rising subscriber acquisition costs across the board, although the operators will in turn be pinning their hopes on increased data revenues to offset these rises.

And so (to announcement number 3): the App Store has passed the 2 billion download mark, the last billion of those coming in less than five months. These are truly mind-boggling figures. Have I said that before: well, my mind is well and truly boggled, so there.