EUROPEAN CARRIERS might be a little concerned about reports from the US that suggest AT&T might not be doing so well out of its exclusive deal with Apple to carry the Iphone, which everyone thought would see it raking in coin.
The general perception was that AT&T would make a fortune and get loads of Apple fanboys signed up as customers. Competing US mobile telecom companies muttered that the whole thing was unfair and they should have been allowed to join in. European mobile telecom companies bid to land similar deals, believing such franchises would be in their best interests.
However it is now starting to look as if things did not move as planned and those who sup with Jobs' Mob should use a very long spoon. True, the Iphone attracted new customers, and it probably gained AT&T a bit of Apple's smugly self confident 'cool image', but it seems to have come at a cost.
While the FCC is questioning whether some deals are good for the industry, it is clear that AT&T itself has been losing over its Iphone deal.
It trumpeted that it had at least 10 million Iphone activations since they became available in mid-2007, but only 40 per cent of these were new customers. Okay, four million new punters is not to be sneezed at, but the number appears to be falling off. It fell to 35 per cent in the most recent quarter in which the Iphone 3GS became available.
In a best case scenario the Iphone might have kept some AT&T customers from defecting. Since the Iphone arrived in the third quarter of 2007 the percentage of customers who leave has dropped to just under 1.5 per cent from 1.7 per cent.
AT&T claims that Iphone customers generate much higher revenue per user than the average, close to $100 a month. However to keep Apple happy, AT&T paid a $400-a-phone subsidy to keep the Iphone cost down for those who signed away their souls on two-year contracts to buy the thing.
For an Iphone customer to make AT&T any cash they have to pay the telecom firm $2,000 a year. If AT&T is right, on average punters are paying $2,400 during that time. But $400 over two years is nothing, really.
But actual revenue figures might be even worse than AT&T is letting on. JP Morgan Chase analyst Mike McCormack said that other smartphones that come with a lower buyer's subsidy tend to generate similar average-revenue-per-user levels as Apple's device. In fact the Iphone subsidy depressed AT&T profit margins, he claimed.
Then there is the small problem of AT&T's network. From day one Apple users have complained that the telecom's network was not up to scratch. Now they are really hammering it, downloading material online for a flat $30 a month fee.
AT&T's network, which was flaky to start with, appears to be unable to handle the extra traffic. While AT&T has made improvements, it is still not really able to take the strain.
Now the fear is that if AT&T's US rival Verizon eventually also gets the right to offer the Iphone, some of those four million customers who signed up for AT&T might defect.
In America it is starting to look like the only winner out of AT&T's big Iphone deal has been Jobs' Mob.
The situation in the EU might follow the same pattern. While the European telecoms firms haven't offered the huge subsidy that was seen in the US, they also don't have the same network problems. T-Mobile, Orange and O2 might be rushing to look at their books to work out if signing up to offer the Iphone was really such a good deal for them, after all. µ
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