TechWeb

Apple Demands High Price From European Carriers To Offer iPhone

Aug 24, 2007 (11:08 AM EDT)

Read the Original Article at http://www.informationweek.com/news/showArticle.jhtml?articleID=201802274


Resting on the laurels of its successful iPhone rollout in the United States, Apple is preparing to duplicate its lucrative deployment in Europe where it has an additional advantage of not having to face a competitor with an extensive high-speed network.

Investment analysts have estimated that Apple cleans up financially with its exclusive contract with AT&T, reportedly making $3 a month for each iPhone subscriber and $8 for each new subscriber, according to analyst estimates. Apple may do even better than that with the European cellular networks that are negotiating to offer its iPhone.

Apple CEO Steve Jobs is keeping the European wireless world on edge as he lets the suspense build as to which service providers will get exclusive rights in their respective countries to market the hot phone. Apple is said to be asking for 10% of the revenue from iPhone voice and data usage in Europe, a deal that would make other handset providers green with envy.

No other mobile phone makers could demand such a cut of the revenue. But Apple's iPhone has so much buzz and is in such demand that Apple can demand financial terms that wireless carriers would grant no other equipment maker. That follows a pattern that Apple set with its iPod music player and iTunes music store, which is so popular that it allowed Apple to dictate terms to music companies as to the price they could charge for each song and album.

So far the grapevine has the following deals being consummated with Apple: Deutsche Telekom's T-Mobile in Germany, Telefonica's O2 in the United Kingdom, and France Telecom's Orange in France. Like Apple, the service providers refuse to talk specifics. Analysts are looking for a formal announcement to take place at a trade show in Berlin at the end of August.

Louis-Pierre Wenes, a France Telecom executive, told the Paris Match this week that his company is talking to Apple about the iPhone but an announcement is likely to be several weeks off. He said that no deal had been signed with Apple. He was quoted in the article as saying: "Several operators are still in talks with Apple. I think it will be several weeks before we have an announcement. A deal in September, as has been reported, seems impossible to me, if only for technical reasons."

In the United States, Apple has an exclusive deal with AT&T, and AT&T's iPhone customers use the European-developed GSM EDGE network, which is slower, for instance, than Verizon Wireless' CDMA2000 EV-DO Rev A network. The high-speed CDMA2000 technology isn't in significant use in Germany, France, or the U.K., where the slower EDGE network has a presence.

Vodafone Group's CEO Arun Sarin, whose firm is a partner with Verizon Wireless in the U.S., has raised questions about the relatively slow speed of the EDGE network. Apple and AT&T have partially worked around the speed issue by enabling iPhone consumers to use Wi-Fi, which has high speeds.