Apple could end all exclusives next year to chase market share
Published: 1 September, 2009
Speculation has been building all year that Apple's iPhone exclusives, which helped redefine the vendor-operator relationship (in a closed, retro way, many would argue), will soon come to an end. Most of the newer launches of the handset have been on a non-exclusive basis, and some early partners like Orange France have already lost their rights. The remaining exclusives will all end within a year, a new research note predicts, a move that would primarily affect AT&T and, to a lesser extent, O2 UK and T-Mobile Germany.
These two European Apple partners are already building credible handset strategies to make up for losing sole rights to the ARPU-boosting (but margin hungry) iPhone - T-Mobile is heavily focused on Android, while O2 is launching the Palm Pre, Samsung Galaxy and other high profile phones as exclusives. But AT&T may have a tougher time transitioning - its sales remain about half of the iPhone's worldwide total, and the Apple device has proved far more important in the US elsewhere, making its sole carrier heavily reliant on its charms to support strong ARPU and customer retention/acquisition trends.
The investment note, from Piper Jaffray analyst Gene Munster, argues that the exclusives will end by next summer with the introduction of a new generation iPhone on a multicarrier basis. He argues that the end of the Orange France exclusive, although this was forced by new laws banning such deals in the country, has taught Apple a valuable lesson. "In France, the company now enjoys dramatically higher market share (in the 40% range versus about 15% in ROW) than in countries with exclusive carrier agreements (such as AT&T in the US, where the iPhone has market share in the mid-teens). We believe Apple is seeing the increased unit sellthrough more than offset the slightly (about 10%) deteriorated economics per unit involved in non-exclusive agreements."
Even the new China Unicom deal has not been confirmed as an exclusive, although this is largely a technicality in China, since the iPhone does not support the other carriers' CDMA and TD-SCDMA networks. Although Apple has repeatedly been rumored to be working on a CDMA device, possibly the elusive tablet, for Verizon Wireless, a CDMA2000 iPhone does not appear to be on the horizon immediately - though the market share boost Munster foresees from a multicarrier market will only be significant in the US if Apple can target the CDMA carriers as well as AT&T and T-Mobile.
The Wall Street Journal reports that AT&T's exclusive expires next year and the operator has been trying to persuade Apple to extend it at least until 2011, though if Munster is right, its chances may be limited. His note also speculates that Apple is dissatisfied with its iTunes video content range and is embarking on "lengthy negotiations, in order to bring the rights for TV and movies up to speed in a digital world". An unlimited, monthly subscription model may be adopted for broadcast and cable content in the US, at about $50 a month, and could be tied into an upgraded Apple TV.
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