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Mobile operators with exclusive contracts to sell Apple's iPhone are bracing themselves for significant losses on unsold stock as they clear the shelves to make way for a new, faster version expected this summer.
O2, which sells the phone in the UK, and T-Mobile, the German distributor, are said to have significantly overestimated the number of first version iPhones that would sell in Europe.
Kathryn Huberty, an analyst at Morgan Stanley specialising in Apple, said the losses on early model iPhones would be "significant" even though they may recoup some of this in monthly revenue from customers who bought the cheaper devices.
Ms Huberty said European mobile executives seemed to have become over-excited by the hype surrounding the iPhone at the time of its US release on the AT&T network last June.
They had since had to take steps to shift stock on which they would now make a loss in order to clear the shelves for the new 3G iPhone, which is expected to be in greater demand in Europe than in the US because of the more advanced phone networks.
On Tuesday O2 announced it was cutting the price of the iPhone by more than a third — from £269 to £169 — and two weeks ago T-Mobile made an even more drastic cut, from €399 (£319) to €99.
An O2 spokeswoman said the price cut was "not a reactive move but part of a well thought out strategy of maximising the success of the iPhone in the UK."
T-Mobile was not immediately available for comment.
With Orange, which won the contract in France, the three sold 330,000 units to the end of December, but industry sources say that European sales of the iPhone were forecast to be between 500,000 and 600,000.
Orange has yet to cut the price.
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thats correct the iPhone does not support picture (mms) messages
james, leeds,
I was told by my O2 sales person that the iphone doesnt send picture messages (mms) all you users out there is this the case?
Kim, Harrogate,
While the hardware change is one thing, I feel the big Apple win will be in the release of the new software supporting Microsoft exchange server - with push e-mail / calendar / contacts etc. The second that happens it will be good by Blackberry.
P , Guildford,
I only hope that the new version has a bigger camera because the present 2MG is not enough.
Mark, Canvey Island, Essex
i am very interested in the new iphone but i'm not happy with it's current design. and the fact the Bluetooth on the phone is near useless.
K, wiltshire,
You are forgetting that the iPhone still has wi-fi, which is far better than any 3g. (and most public areas have some sort of wi-fi for free) Also have any of you visited the apple website? The only thing iPhone related in June is the software update (also free) plus I did this on my iPhone!
David Beattie , lancaster, Britain
By far the best phone i have ever owned (and i've owned a few!).
I will be first in line again when the new 3G version is released as long as they dont get rid of the touch screen.
As far as the price tag goes, you get what you pay for!
Lee Shelford, Enfield, UK
Why would I want a iPhone?? It hasn't 3G (in the Netherlands there is no EDGE support), it has no buildin GPS, I am not a music fan and I am not paying 50 Euro each month and 500 euro for the phone.
I am used to pay 25 Euro each month and getting a cashback of 400 Euro instead of paying 500 Euro
Robin, Eindhoven, Netherlands
I read this article on a bus and had my say, on my iPhone. I will never go back to a free phone again. The price is more than worth it.
jake, lincoln ,
Cost aside, the product is superb to use.
It's really so much more than a phone, and easy to use.
If you want only a phone get a freebie on one of the networks. If you want a tool, buy it.
I doubt I'll use anything else .
DJ, Brill,
Apple severely failed in one key area when marketing the Iphone, the pricing. Apple hoped that in creating such an innovative and exciting product they could exploit consumer excitement and charge unbelievably high prices for the device itself and the tariffs. Unfortunately for Apple this completely backed fired and most people like myself opted to wait for a reduction in price or at the very least the better value for money 3G version. The original price and original tariffs were quite simply ludicrous, as we speak both have now changed which quite clearly signals something did not go right. The Iphone had the potential to be one of the best selling devices of this decade, due to company greed this opportunity has now been lost and a reputation slightly damaged. I myself will wait for the 3G version, one can only hope that the greed in pricing does not continue with the 3G version and Apple will concentrate more on making the device available to the masses and not the luxury few.
John, London, UK
I feel bad for people who spent the money on the non 3G iPhone. I think there is going to be a huge used market for the iPhone cutting the price significantly...however I do have to believe there are some people out there who don't use the data much, so perhaps there still will be some market on ebay and the likes for the older generation iphones
http://3giPhoneinfo.com
Adam
Adam White, Glasgow, Scotland / UK
Where did you get £1500 from David Leslie?
An iPhone contract costs £630 for 18 months. What did you do, double it and round it up?
Jason Ball, Nottingham,
The addition of 3G is already known - the next version of the iPhone's operating system is out there, and Apple has added the driver software for a particular 3G chipset from Infineon. The current camera is actually surprisingly good - much better than the 2 megapixel figure would suggest - but obviously mounted in the wrong place for video calls. On the other hand, having had video-capable phones for several years now, I have yet to make a single video call!
The tariff O2 offers does strike me as pretty poor, partly because it bundles a lot more minutes than I'd ever consider using. The data component is available for £7.50/month - from O2 themselves, among others - my phone usage doesn't come close to justifying the other £27.50.
I doubt there will be a keyboard version (apart from anything else, Steve Jobs hates buttons!), but either a slightly bigger screen or a second screen could happen; there's about an inch of device surface which isn't screen at present. Or a swivel camera.
James, Perth, Scotland
Even if an "official version" will ever come out in Italy, I'll probably keep my unlocked one; to have the freedom of choosing provider is too important.... you have to give money to somebody, but at least I want to choose who gets my money.
The iPhone is too great to be left in the hands of the average telco provider...
fm, reggio emilia, italy
I love my iphone, it a great piece of art . I am not very happy that in Germany, France and now I hear in Italy, one can buy an unlocked iphone but not in the UK. I did inquire at Apple and O2 and must say the sales persons I talk to were not happy.
We ought to have a choice to which carrier we want, also to be able to use sim cards of countries we visit
Farouk, London, United Kingdom
The number of non US citizens buying iPhones in the SU Apple Stores then unlocking them to use on their existing contract might be helping to cause this discrepancy in sales.
Derek, Edinburgh, Scotland
I do like my iPhone so much, that I will never go back to any other smartphone.
I hate the official carriers though, for their pricing:
My March 2008 bill was 1,400⬠because I used it in Vietnam and in the US, that same month. I used it to go on the internet, check my mails, just the usual stuff that you expect to do when travelling (I also know that I could have disconnect the access), but what is free when using it at home (France), it is a ripp-off when you travel.
One day, I hope that I can make Orange pay for these stupid and outrageous tarriffs, and if a new operator shows up with a reasonable fare structure, I will leave Orange immediately!
Pascal, Paris, France
Business success depends on more than 3G, for serious mobile IT use it also needs Bluetooth which can be configured so the phone can be used to enable 3G access from a laptop. I've had a T-Mobile smartphone with web'n'walk (i.e. 2Gb pm internet) for a over a year and this is the absolute killer feature. Tempted as I am by the design features of the iPhone and the superior web browsing experience compared to Windows Mobile 5 (well, apart from speed) the ability to hook up a 'virtualy anywhere' broadband on my laptop via my phone would be impossible to give up. Windows Mobile 5 can happily do everything else an iPhone can do, albeit with less style, so it's impossible to justify a move on any other grounds.
kevin woolley, Stirling, Scotland
It fascinates me that you have millions of people over here in America that have been walking into Apple stores, ready to buy an EDGE iPhone, wallets out and ready, only to be told they are out of stock. And at the same time, Europeans that only snicker at a phone that isn't 3G, have iPhones, with $300 off the price, just piled up on store shelves. Doesn't make very good business sense!!!
Gary Rybold, Irvine, CA, USA
I've been using the iPhone for five months now and it never leaves my side (ask my wife...). The key driver is the internet access - it is incredibly easy to use and fast on WiFi and EDGE. Can't wait for a 3G model, but I would never go back to any previous phone now (and I've used the lot!).
Simon Hepburn, St Albans,
To be brutally honest, until O2 and Orange become more flexible on the range of contracts they give, iPhone will stay a fairly exclusive product. The fee - which they are reducing - is not a big deal, you'd pay £200 anyway if you were to buy a new iPod.
The problem is the contract. iPhone, great product, i'd love to have one, don't mind shelling out the money for a new iPod. But £800 in total over 18 months when my current mobile costs £180 over that period? You're having a laugh... I'd buy a new laptop with that money thanks very much - and I fact I have ;)
Kerome, London, UK
How would a flip version with a qwerty keyboard enable a bigger screen? The current iphone design is just a big screen and a single button - you couldn't make the screen any bigger without increasing the size of the device - which is unlikely. Apple is also pretty good at managing to run stocks down before a product refresh. iphone supplies have been patchy in the US for a while now so I think its unlikely that UK suppliers will catch too much of a cold. It seems to me that this story is plain nonsense...
Mike.e, Plymouth, Devon
With iTunes about to be attacked by DRM Free Tescos and Amazon and the other phone manufactures catching on to the Apple magic of making standard operations, very simple...Apple have far more swinging on this iphone 2 than I think we appreciate. China, India and Oz customers are likely to be offered better deals options: no exclusive operator deals, because Apple needs the sales numbers and exclusivity doesn't work outside of the US.
So what is the cost so far, with MS scoring an own goal with Vista, Apple have thrown away the GOLDEN opportunity to make a real impact outside of the US in mobile phones and computers by over pricing and offering a poor value deal for the iphone. Bill Gates and MS must be a very relieved to see Steve Job making such a hash of things with the iphone marketing. The halo effect opportunity has gone. Nokia, SE and Samsung learn quickly and will have the iphone killer soon. Apple could have been even bigger and strategically safer, if only..Unlucky Mr Jobs.
Robbie, Plymouth, UK
This article has no basis in fact. Its market speculation (Morgan Stanley analyst) and the inability of journalists to wait for announcements of figures.
Even though the companies involved say this is just part of the selling process, even though of all the Smart phones, the iPhone has been shown to actually be the lowest-priced, still we get this kind of speculative fill-the-page at-all-costs journalism.
Annoying nonsense.
walter Dithers, coventry, warwicks
There are rich suppliers, and people who supply Apple, but very few people who get rich supplying Apple. I've been privileged to see the kind of contract SJ offers suppliers (at the same time as he smiles and reassures them they're "strategic") and you can bet that if anyone sustains a loss on unsold old models, it won't be him.
--- Ms Huberty said: "Steve Jobs's (Apple's chief executive) end game is .... and then sell as many units as possible. "
I'd disagree. The way to maximise sales of Macs and Rhapsody starting in 1997 was obvious, and he chose not to do it. iPod has dominant market share, but as much by luck as by design, and no other Apple product has ever achieved it (I think not even the Apple II, which was iconic, but too pricey for most people.)
Ian Kemmish, Biggleswade, UK
The Blackberry touchscreen with Qwerty keyboard will be out soon. Apple has to make these improvements to have any hope of attracting any business users.
Gary Chateau, New York, NY
I am glad the retailers have got egg on their faces, as usual rip off Britain, retails think they can rip off the publc and charge what they think they can get away with,at last the comsumer has seen the light on this grossly over priced product. Long may this trend continue, so eventually we will see relalistic prices on products in this country.
Peter Hogg, Ilkley, Britain
When it goes PAYG for about £79 I MIGHT be interested. Not before!
Herb, London, England
Or rather, discounting an old product just before a range refresh. Smart move. Computer games launch for £45, three months later they're £20. Not sure where you got £1,500; more like £630 for 18 months. I can't really understand where all this resentment for Apple comes from; it's a phone, it's not cheap, it's your choice.
Nick Dodd, Brighton,
Nobody is doing the contract cost calculations on a "high end" nokia or samsung phone. If you do it wouldn't be any different than the total costs of an iphone 18 month contract. Apple is not married to this model, so it might be more flexible in the future with multi carrier support. But the phone still is by large margin the most advanced package for a powerful mobile device. You got a powerful OSX (unix based) system not a crappy symbian one. You got super sensible multitouch and not the common single touch where you need much pressure to type. A high res. screen i/o the common boring 320*240 resoltion (dont know why they still make these). Battery power is great. You got a real mp3 play, an ipod with all advantages plus super smooth video playback. Real email client etc. And the device is really slim, not bulky like most smart phones. With all the other things in the pipeline, iphone will lead the market vor years. If you don't need that, wait for a cheaper nano version.
Christoph Schmidt, Frankfurt, Germany
Forget problems with the batteries and the cost involved. A major reason is probably that most people are satisfied with their existing phone, which does all that they want or need from a mobile, so why change?
Steve, Jeddah, Saudi Arabia
Firstly, exactly how or why are the mobile carriers going to make a loss on the units? The iPhone is not subsidised by the networks, and all of the discounts are being done in conjunction with Apple.
Secondly, The "Asia-based analyst" has completely missed the point of the iPhone. In fact, I think he is describing completely different products.
Thirdly, in response to David Leslie, The iPhone costs £799 for an 18 month contract (or £899 if you bought it before the discount). The majority of that is in the £35 / month contract, and what you get for that is more than comparable to any other £35 / month contract. It's actually very good value (I know, before I bought the iPhone I compared the costs to every other alternative device with the same service).
As for selling or not selling, I see loads of them around. When I bought mine in Feb there were 4 other people in the O2 store buying them at the same time.
Gareth, London, UK
It's hard to take this article seriously when it suggests that the next model will have a keyboard or come in multiple versions. And as for 'lack of success', Apple said they would sell 10m in 2008. Lets see if that comes true before judging.
I'm in for the 3G version - it's the one I've been waiting for.
Tom, Edinburgh,
Typical attempt to hide the truth.
When people found out that the battery in the first I-Pods quickly deteriorated after a few hundered charges and then discovered to their horror it could not be replaced, they were carefull to look at the I-Phone - and found the same problem - punters just got wise - thats all.
That is the real reason it could not be sold.
You can fool some of the people...
Tony, Blandford, England
if you want to be the first you always pay a premium.
what people are forgetting was that you were paying only an extra £69 for a phone added to your iPod
geff, London , UK
would have had one if I could get it on a business tariff, but couldn't, so got a Blackberry instead
Kaine, Bridgnorth, UK
Funny how all the people bored enough to buy one of the early handsets will be trying to hide anyone from seeing it now, instead of showing it off.
Consumerism isn't quite as powerful as it's made out to be..
Leon Macgregor, London, UK
Nice to see hype failing over substance for a change....
Mickey, london,
Apple should take a look at Amazon Kindle's model.... Free bandwith included in the purchase of the device, there is no reason they couldn't have the cell service (at least just for itunes purchases) in every ipod for free.... Kindle did it, we know it's possible.
John Jacob "Jake", Los Angeles , CALIFORNIA!!
Well of course its not selling, they take a middle of the range phone, stick "i" in front of it, double the price and expect us all to buy it!
Paul, Wiltshire,
they should all back to apple who are making a killing on the devices and contracts, remember apple takes a profit on the phone and a slice of the contract the operator sells as well
if apple and the operators think that we consumers are willing to pay £300 and then another £400 on a contract they have another thing coming
the lack a qwerty keyboard will make business customers less likely to come away from their blackberry's, as for typing on a touchscreen is a nightmare
Michael Nee, Newcastle,
There will be no 'flip' or 'keyboard' and the design will hardly change if it all. Whoever wrote this article needs a lesson in apple design strategy.
steve, london,
Is the "Asia-based analyst" aware of the ipod touch? Sounds a lot like the product they describing...
The touchscreen is the selling point - there simply won't be a qwerty keyboard or side/flip version. Why would they take a technological backward step?
The most likely advancement that I have heard rumoured - apart from the obvious 3G / 3.5G platform - is a higher-spec camera positioned behind the touchscreen, allowing a centred capture for video-calls.
steven willis, newcastle upon tyne,
When recession hit workers are worried about redundancy and paying the mortgage, the new iPhone had better be a bargain before I'll be interested!
Colin Soames, London,
What a shock, a mobile priced at £1500 for an 18 month contract fails to sell. Didn't see that one coming.
David Leslie, Perth, Scotland
consumer 1 jobs nil, great product poorly priced = failure two ways, unsold stock creates distributor apathy, discounting of unsold stock makes consumers more inclined to wait for price cuts
pro lee, london , england