Europe’s $1,478 iPhones
One of the questions left unanswered when Apple (AAPL) finally sealed the deal with Orange to market the iPhone in France — where it’s illegal to sell a phone that’s locked to a particular carrier — was how much customers who wanted to buy the device without a contract would have to pay.
Now we know, thanks to a court in Hamburg, Germany: a premium of 600 euros, or $880, which brings the total price of an unlocked iPhone to 999 euros or $1,478 (including 17.5% V.A.T.). iPhones sold with a two-year T-Mobile contract will cost 399 euros (about $590).
T-Mobile, Apple’s German partner, had been served on Monday with an injunction temporarily blocking it from selling locked iPhones. Deutsche Telekom, which owns T-Mobile, is appealing the court order, but said this morning that it will comply — and it announced its new price points.
Orange has not yet announced prices and rates for France, where the iPhone goes on sale on Nov. 29, but will presumably follow T-Mobile’s lead.
French law prohibits tying the purchase of one product to the purchase of another — a cellphone to a particular carrier’s service plan, for example — which was one of the sticking points that delayed Orange’s deal with Apple. According to today’s New York Times, several European countries have similar laws on the books, including Belgium, Italy and Finland.
Germany’s laws are less clear, but it was on the strength of the rules on the books that Vodafone on Monday won a temporary injunction.
The $880 premium is high, but not totally unexpected. Piper Jaffray analyst Gene Munster has estimated that Apple gets $18 a month from AT&T, or $432 over the life of a two-year contract — revenue Apple would have to give up if it were forced to sell unlocked iPhones in the United States.
T-Mobile and Orange also lose the monthly fees they were expecting when they negotiated what they thought were going to be exclusive contracts with Apple.
$880 minus $432 equals $448. Sounds like they basically split the difference.
Isnt the real issue here not what Apple are extracting from customers (because they can) but rather the basis on which mobile phone calls are charged. What other industry (Oligopoly?) can force its customers to specify a month in advance how much product they will use (knowing usage is variable and therefore impossible to forecast) , make them pay for it a month in advance, the charge extra for any over use and not refund any other use. The industry calls the under and overages breakage and makes 50% of its profits from it. I call it an anti competitive rort, perpetrated by a cartel. Good luck to Apple extracting some of it by being smarter.
EVERY SINGLE CELL PHONE YOU BUY REQUIRES A MONTHLY SERVICE FEE!! Why must everyone single out the iPhone by adding the monthly service fee to the ‘cost’? EVERY PHONE has this issue, not just the iPhone. The press needs to stop doing this nonsense.
That is simply not true - not in Europe anyway.
The Apple iPhone was named 2007 Invention of the Year by Time Magazine, selling over 2 million units in a quarter, and now launching worldwide in the UK, Germany, France, and soon, Australia, and China, has revolutionized how mobile phones will be made for years to come, enabling users to run internet applications anywhere, while staying connected with friends and family, and carry a shelf-load of music, videos, photos, and a wealth of other useful information to go such as maps from Google. I’m glad I jumped into investing in its stock before it turns into the next Google story. A great addition to the iPhone’s features would be voice recognition software and the ability to process voice-activated commands instead of typing. A higher resolution digital camera with TV output is also nice for slide presentations right out of your pocket ready to go at a moment’s notice.
In Europe the mobile plans are very different, you can switch phones between plans anytime you want. You can buy a phone without a plan etc. The FCC and Feds side with the carriers in the US unlike Europe.
Would Mercedes sue BMW because drivers could NOT buy a Mercedes at a BMW showroom?
No!
Vodafone did not want to agree to Apple’s terms and, now, Vodafone realizes that it could lose business.
Vodafone is using the current law to protect its interest and filed the lawsuit as a fallback tactic, since its strategic decision, to not pay Apple, was WRONG!
To Eric: and every other cellphone comes with a subsidy from the network operator to get someone to sign a contract for service, and an ETF to recoup that subsidy should the person end service before the contract expiration date. This is nothing more than Apple lining its pockets at the expense of idiots willing to pay. No subsidy, no ETF, and 999 Euro for an unlocked iPhone? Laughable.
EVERY SINGLE CELL PHONE YOU BUY REQUIRES A MONTHLY SERVICE FEE!! Why must everyone single out the iPhone by adding the monthly service fee to the ‘cost’? EVERY PHONE has this issue, not just the iPhone. The press needs to stop doing this nonsense.
I don’t think this comment could have more completely missed the point of the article. It’s not about the monthly service fee. It’s about knowing the initial subsidy built into the iPhone sale price that’s made up for over the course of the contract. Most other phones can be bought without a contract, from either the manufacturer or the provider or both, so it’s easy to find that number. For example, the new LG Venus from Verizon would cost $199 with a 2-year contract, but $369 without a contract (through Verizon). That implies a subsidy of $170. The iPhone was not available previously without a contract. Now, because European regulations don’t allow the iPhone to be tied to a single carrier, the iPhone can be bought without a contract, so we can get an idea of how much the subsidy is. The $18/month is not the monthly fee to the user … it’s an estimate of the amount AT&T has to kickback to Apple each month to make up for their subsidy at the time of sale. Nowhere does the article imply there is a monthly fee for iPhones and not other cell phones.
My only quibble would be that the author doesn’t back out the VAT cost, making the no-contract premium seem too high when compared with US costs.
This solution helps Apple and T-Mobile while really doing nothing for Vodafone. Anyone willing to pay an $880 premium to use the iPhone on another carrier obviously REALLY doesn’t want to switch carriers and is very unlikely to do so. Apple and T-mobile can split a hefty profit from customers who were otherwise probably not going to buy an iPhone. Vodafone, for their trouble, simply continues to collect service fees from their current customers (the ones who weren’t going to switch anyway)and loses out on an opportunity to to sell new phones to these high end customers. This was obviously going to happen at some point, Vodafone simply sped up the process.
Ignorante Philip. Questa storia e’ vecchia.
Old news Philip, they’ve already agreed to sell for 999 Euro. Actually, Germans are following the French in this case.
Do more research and be somewhat knowledgeable what posting and showing your behind.
ex ped: Some French supermarkets have started selling 999-euro iPhones bought in the U.S. and unlocked without Apple’s blessings. But if Orange has announced its prices for unlocked iPhones, it’s news to Google. . –Philip Elmer-DeWitt
EVERY SINGLE CELL PHONE YOU BUY REQUIRES A MONTHLY SERVICE FEE!! Why must everyone single out the iPhone by adding the monthly service fee to the ‘cost’? EVERY PHONE has this issue, not just the iPhone. The press needs to stop doing this nonsense.
ex ped: Huh?
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Silicon Valley veterans like to joke that Steve Jobs must be surrounded by a reality distortion field; if you get too close to him, you start to believe what he's saying. Thanks to the success of the iPod, the launch of the iPhone and the renewed interest in the Mac, Apple has made believers out of millions of customers - and made a lot of investors rich. But Philip Elmer-DeWitt believes that an ounce of skepticism never hurts when writing about the company. He should know. He's been covering Apple - and watching Steve Jobs operate - since 1982, first for Time Magazine, then for Business 2.0, and now for Fortune.
“EVERY SINGLE CELL PHONE YOU BUY REQUIRES A MONTHLY SERVICE FEE!! Why must everyone single out the iPhone by adding the monthly service fee to the ‘cost’? EVERY PHONE has this issue, not just the iPhone. The press needs to stop doing this nonsense.
That is simply not true - not in Europe anyway.
Posted By Rick, England, UK : November 22, 2007 8:18 am”
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…In many countries in Europe (that I lived in, including England) there’s are a lot more freedom specially with mobile phones! – Any one can buy a phone and choose if it’s ‘tied’ to a contract or not!
THAT’S SIMPLY THE THRUTH – SPECIALLY IN EUROPE ANYWAY!
- I never bought any mobile phone in UK, that is tied to a contract, or requires a monthly fee, simply because I have the freedom to choose what it’s best for me. (and I’ve bought very cheap and very expensive ones too !!)
I hate the fact to be tied to a contract or monthly fee.
I like to have the freedom to choose a better carrier and specially better rates (and bring my old number along) whenever I feel like it.
I also travel a lot. And living in Dublin (2 years), London (6 years), Lisbon (over 8), and Sydney (5 years) it would not work for me being tied to a contract or monthly fees, specially since it has became a ‘fashion’ in London a standard 12 month contract, is now 18 min. – ridiculous to say no more.
Why not the iPhone free of fees and contract ??
It only makes sense to a modern and consumer orientated society.
THAT’S SIMPLY THE THRUTH – SPECIALLY IN EUROPE ANYWAY!!