Cecilia Aronsson, a Swedish business reporter, is a fellow at the Innovation Journalism Program at Stanford University. Through July, she’ll write columns for VentureBeat.com about her experiences in Silicon Valley. Here’s her first column. 
The European business press is speculating that the next market Apple plans to target with its iPhone is Sweden, a hotbed of mobile innovation and the home of rival mobile phone maker Ericsson. But I was tagging along with 15 leaders of the Swedish telecom and computer industry yesterday as they visited several Bay Area technology companies, and from what I heard, it sounds as if Apple may not understand the Swedish market.
While US customers are used to choosing a carrier and accepting that not all phones will be available through that carrier, Swedish customers are used to having whatever phone they want with any carrier.
Apple’s strategy so far has been to hook up exclusively with one mobile operator per country (AT&T in the US). The iPhone only works with AT&T’s SIM card (the card that contains the user’s data).
In Scandinavia, though, things are different.
Norwegian Jon Johansen was one of the first to hack the iPhone after its release last June to get it to extend beyond AT&T. Hacking iPhones has now gone commercial with services and software like iPhoneSimFree. Hundreds of iPhone handsets are already on sale on Sweden’s equivalent to Craigslist, Blocket, priced at around $600.
Rolf Persson, a senior IT consultant in charge of the Swedish delegation, told me about his grandchild who has already changed mobile phones ten times before the age of 14. The kid recently bought a fake version of the iPhone, imported from China, with no operator strings attached. There are currently more fake than real iPhones circulating in Sweden, according to Persson.
According to Swedish technology newswire Ny Teknik, Apple will be introducing the iPhone in Sweden before summer. Its Swedish partner operator will most likely be TeliaSonera, the largest national service provider, which runs on an EDGE network just like Apple’s other European partners, O2 and T-Mobile.
The iPhone started selling in Europe last fall. So far it’s officially available in France, England, Germany, Austria, and Ireland, where it was introduced less than a month ago. Demand has been strongest in England, where the exclusive service provider, O2, sold 30,000 handsets in just the first week. Total sales of 200,000 were recorded at the end of January. French sales have been just okay, reaching a total of 70,000 phones by the beginning of 2008, close to predictions by French iPhone operator Orange, according to Apple.
Germany, however, has been a very weak iPhone market so far. The number of phones sold are about the same as in France, despite the fact that Germany is a much bigger market. The exclusive provider, T-Mobile, just announced a huge price reduction to $155 from $625 for the 8 gigabyte iPhone. Buyers have to agree to a two-year monthly subscription fee of $140 per month — almost as much as the phone itself. The question is whether this will spur sales or remain so expensive that it estranges Apple’s handsets from serious European consumer consideration.
One third of the iPhones sold in Europe are unlocked after purchase, according to Ny Teknik. Still, Apple CEO Steve Jobs is holding on to the initial strategy of one single partner per country. Why so stubborn, Jobs? Of course it’s tempting to copy the revenue model the company has in the US with AT&T, where Apple gets $80 for every phone sold plus an additional $10 per month from subscription fees for two years. However, if that strategy leads to a growing number of iPhones being unlocked and used with other operators, the returns are going to shrink significantly for Apple down the road.
6 Comments
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Azazello said:
Buying a Chinese iPhone cripple is good judgement and switching carriers is not. Freedom to choose a cell-provider is a European thing. Market-share is more important than innovation and earnings. Dubious assertions.
Cheers!
PS: I would leave Steve Jobs out of this.
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Mark said:
You should really do your research if you’re going to write. The iPhone can hardly be called a success because:
1) 02’s sales figure was 190K which was the bottom end of estimates. 02 subsequently had to dramatically improve their tariff to boost sales.
2) Orange in France sold 70,000 in the first month and only 20,000 the following month - a massive drop off. This was published some time ago.
3) T-mobile in Germany have had to revamp their contracts to stimulate demand. You did manage to get that right at least.Compared to sales from Nokia, SE and LG the iPhone has been a sub-par performer. To call it a success is ludicrous and shows a lamentable lack of understanding of one’s subject matter.
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Jason said:
I am under the impression that your simplifications about the German market distort the situation there.
T-Mobile offers the iPhone with a variety of different subscriptions. Your quoted price of $155 is only available if you choose the most expensive monthly subscription option (as you can see here http://www.t-mobile.de/iphone/addHandset.do). I believe that the vast majority of current customers will not pick this option but rather a much cheaper (e.g. $75/month) option at which the 8GB iPhone is slightly above $300. At this price you do not get a data flatrate and also only 100 minutes to talk.
Furthermore, I believe it is important to understand the European mindset in this issue rather than the technical differences.
It was not until recently that Europeans were actually made aware of all the costs associated with using cell phones at home and abroad. The EU parliament had to push the cell phone providers (most of which are operating across borders) very hard to create more transparency in the price structures. This alienated the consumers, especially the Germans. One of the outcomes of this disconnect can be found in the rise of prepaid cards (lowering the ARPU tremendously). Parents buy their children only prepaid cards in order to escape the potential huge costs at the end of the month. A lot of very competitive offers by very small retailers exist in Germany. By having a lot of people cancel their contracts upon expiration and switch to these cheaper pay-as-you-go options, people actually want to participate on the fast price movements which they did not get were they on a subscription contract. The operators did not pass on the price reductions and so it seems that they are now suffering from their very own mistakes to exploit the contractual limitations rather than striving for customer excellence. And I believe that if you ask an iPhone user on the street what she would have to pay for the data his iPhone would use abroad, she would not be able to answer that (keep in mind: Europeans travel a lot - for skiing, summer, Christmas, etc.).
And there is also a notion in the German public that the prices for cell phone service are kept very high artificially. For T-Mobile you will find a lot of comments on the internet (and in public newspapers) that the profits from Germany serve to expand their business in the US and their failure to monetize the huge investments in the 3G infrastructure.
With continuous announcements about the “great” 3G infrastructure in Germany, the operators have raised the bar for next generation phones and services, creating a promise they are due to deliver on.Lastly, I agree with Mark on the issue of comparable devices. Europe has always been served by far better models than what was available in the US. The gap between the iPhone and comparable models is not as wide as in the US.
So, instead of committing to a somewhat first generation model of the iPhone which is not utilizing the technological capabilities (i.e. 3G) and offered at a quite expensive price (for the next two years), I would actually blame the operators rather than Jobs for any of this. The operators just seem to be so greedy to finally monetize any of their huge upfront investments in their “great” infrastructure that they are losing the connection to their customers.
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Dan Butterfield said:
Cecillia,
You wrote - “One third of the iPhones sold in Europe are unlocked after purchase, according to Ny Teknik. Still, Apple CEO Steve Jobs is holding on to the initial strategy of one single partner per country. Why so stubborn, Jobs? Of course it’s tempting to copy the revenue model the company has in the US with AT&T, where Apple gets $80 for every phone sold plus an additional $10 per month from subscription fees for two years. However, if that strategy leads to a growing number of iPhones being unlocked and used with other operators, the returns are going to shrink significantly for Apple down the road.”
That was then … this is now (or soon - June 2008) … Look for new iPhone business models as Apple launches their next gen iPhone. IMHO there will be a hiatus in any further iPhone launches until the next gen (3G) model is ready for showtime … and best guesses say that will be circa WWDC 2008 - June 9 - 13.
http://idannyb.wordpress.com/2008/02/28/apple-is-open-to-new-iphone-business-models/I expect that Apple will give serious consideration to a dual launch strategy - … a locked-to-carrier and also a premium-priced unlocked iPhone (ala Apple’s carrier deal with Orange in France).
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david said:
I was yesterday in Sweden, where the most sold ‘cellphone’ is at the moment a 3g dongle to connect to the laptop. The dongle is cheap and the broadband Internet (up to 7 MBPS) is flatrate. I met people who have cancelled their broadband connections at home, because the Internet broadband service through the phone network is sufficient.
The Swedish phone culture is to choose any phone and any operator. The question is how the break-through of the flatrate ubiquitous 3G-Internet. The iPhone has by far the best web-browser and movie watching I have seen so far, which could increase the incentive for getting it. However - how many people (even in the US) would get a computer that is locked to one ISP? If T-Mobile covered the whole of California with their wireless network, would people get mobile computers that only connects to T-mobiles’ wireless network?
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Kenneth Gysing said:
I want an Iphone!!
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TechCrunch Japanese アーカイブ » EUニュース・ダイジェスト said:
[...] •ヨーロッパにおけるiPhoneは地域によって成功の度合いが異なる。現在まで、公式にiPhoneがサポートされているのはフランス、イギリス、ドイツ、オーストリア、アイルランドだ。もっとも需要が強いのはイギリスで、フランスでもそこそこ売れている。しかしドイツ人はiPhoneにどういうわけか冷淡である。ヨーロッパで販売されたiPhoneの3分の1は購入後にアンロックされている。 [...]