Gray Market Crashing Europe’s iPhone Party?
By Dianne See Morrison - Wed 28 Nov 2007 07:58 AM PST
France Telecom’s Orange officially starts selling the iPhone tonight, but it’s already late to its own party. The IHT reports a thriving “gray market” in unlocked handsets has crashed the gala. Phoneandphone.com, a mobile reseller, said it has sold hundreds of the devices since October, despite the fact that a tampered iPhone could end up worthless in subsequent software upgrades. In France, it sells an unlocked iPhone for 699 euros ($1,032). The company has even secured deals with Bouygues Telecom and Virgin Mobile, (NYSE: VM) pricing an iPhone at 299 euros ($441) with a Bouygues Telecom contract. Orange will sell the handset for 399 euros ($589) with a contract.
Does the gray market matter? It depends, of course, how many phones they sell, and how much revenue is siphoned off from Orange and Apple. In the US, Apple (NSDQ: AAPL) reported that 250,000 iPhones--or 15 percent of all iPhones sold as of the end of Q4 2007--were either never switched on, or in the more likely scenario, unlocked. Some estimates put AT&T’s (NYSE: T) lost revenue share as high as $35 million.
Along with the court battle between T-Mobile and Vodafone (NYSE: VOD) in Germany over locked iPhones, the gray market could complicate Apple’s future negotiations to bring the iPhone to more European nations. Telefonica (NYSE: TEF) is said to be balking at the 30 percent revenue share Apple demands. It goes to reason that the Spanish network would be considerably less happy to pay that if it sees its European rivals struggling to keep consumers within their “exclusive Apple carrier” confines. Moreover, Orange is reportedly pricing its unlocked version of the iPhone at 749 euros ($1,105), much cheaper than the 999-euro ($1,475) price tag put on it by T-Mobile in Germany—but only 50 euros ($74) more than phoneandphone.com. You can see the reasoning --fifty extra euros for an “officially” unlocked phone is not too bad of a price to pay, especially as it guarantees that the phone won’t die in future upgrades. But, would Orange have tried on the 999 euro price if phoneandphone.com hadn’t offered a cheaper alternative?
Posted in: Companies, Apple, Operators, Orange, T-Mobile, Countries, Europe
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