Apple Sets Iphone Customers Free.(The Technologist)

Byline: Benjamin Sutherland

A big reason for slack iPhone sales in Europe, analysts say, is that users cannot pick their mobile-service carrier. Apple chooses for them.

Some call it the "Jesus Phone" or the "Messiah Phone." Hype notwithstanding, sales of Apple's vaunted iPhone have been lackluster in Europe. Fewer than 350,000 of the 165 million mobile phones in Britain, France and Germany are iPhones, estimates Seattle-based consultancy M:Metrics. In April, Germany's T-Mobile slashed the price from [euro]399 to just [euro]99, and in Britain O2 and partner Carphone Warehouse knocked [pounds sterling]100 off the price of its iPhones, to [pounds sterling]169. Sales, though, have not been as strong as they have in the United States. Is Steve Jobs losing his touch? Not necessarily. Sleek, feature-packed iPhones cost more than most handsets.

The big explanation for slack sales, analysts say, is because iPhone users cannot pick their mobile-service carrier. Apple chooses for them and collects a cut of revenue. Apple has insisted that this setup works well, consumers like it and sales are good. But Apple's announcement last month that it was overhauling its "single carrier" business model suggests that the strategy isn't working.

Consumers in seven countries will soon have a choice of telecoms when Apple introduces the iPhone, says the company, probably later this year. Two telecoms will compete for iPhone users in Australia, and the device will also be introduced in the Dominican Republic, Egypt, India, Italy, Portugal and Switzerland. The telecoms involved--America Movil, Bharti Airtel, Orange, Optus, SingTel, Swisscom, Telecom Italia and Vodafone--have not elaborated on the arrangements. A Vodafone spokeswoman in London, scanning PR guidelines, said: "For every question it reads 'Not allowed to comment'." Nor has Apple provided much elaboration.

Apple is changing tack, say analysts, because consumers are increasingly annoyed at being limited to one telecom, handset competition is getting fiercer and telecoms are less willing to share revenue. Having rolled out the iPhone in just six countries--the United States, Britain, France, Germany, Ireland and Austria, Apple is still tweaking the model. European consumers have created a huge black market for hackers who can "unlock" the iPhones, so they work on any network. Unlocked iPhones are sold illicitly in shops in Italy and other countries where Apple has not authorized iPhone use. Apple's "anticompetitive practice" of locking phones has damaged its reputation in Europe, says Stefano Cazzani of Studio Cazzani, a telecommunications consultancy in Milan. "People here, they want choice."

So do ...