It’s that time of year again, when the CTIA Wireless show is over and the handset industry looks forward to the next big event, the annual Apple iPhone launch. This year, the company is expected to call its fourth generation handset the iPhone HD, and to create a CDMA stablemate too.
The CDMA rumor has been around almost as long as the handset itself, but may have more credibility this time, since it is believed that AT&T’s exclusive comes to an end this fall. Apple has often been rumored to be working on a device for Verizon Wireless that would be sufficiently different from the iPhone to avoid breaking the AT&T deal, but that would fragment the famously homogeneous Apple design and brand. The big chance might have come with the iPad, since that has a whole new format, but Apple stuck with AT&T for its tablet. But it is seeking the broadest possible distribution for the iPhone now, going non-exclusive in nearly all markets. It may well remain more selective in the US than elsewhere, restricting its GSM presence to AT&T, given the unusually close nature of that relationship, and working only with Verizon on the CDMA side. This would bring it better terms from the big two carriers and preserve some of the mystique and exclusivity of the iPhone in its home territory ‘ an advantage it does not command to the same extent elsewhere.
It will certainly be easier to launch a Verizon model if the AT&T exclusive has expired, however. Although the CDMA leader has been very focused on Android in the recent revamp of its smartphone strategy, like AT&T it aims to have a broad-based approach, remaining close to RIM and introducing LiMO devices for its own brand later in the year.
According to The Wall Street Journal, the iPhone HD will be slimmer than its predecessors and will have a faster apps processor. This could be the inhouse A4 design, based on Apple’s PA Semi acquisition, a gigahertz chip that features in the iPad. If so, that would be a loss for Samsung, which makes the iPhone 3GS’ apps processor, and would be relegated to the position of manufacturing partner for the A4 plus memory supplier.
Other new features are expected to include a front-facing camera for videoconferencing and various operating system upgrades including the much demanded multitasking support for third party apps.
The WSJ says the two versions will be made by different Taiwanese manufacturers ‘ incumbent partner Hon Hai Precision Industry for the GSM flavor, and Pegatron Technology (part of AsusTek) for CDMA. One source said Pegatron would start mass production in September, pointing to a Verizon launch in good time for the holiday period, and safely after AT&T’s contract with Apple changes. The launch date for the iPhone HD is rumored to be June 22.
There is little doubt that the new iPhone will be a big hit in the US and some other developed markets, even though it will never again have the space to itself as it did in its first year. Research indicates that two-thirds of iPhone developers are porting their wares to Android, and the software base of the Google system should soon match that of its rival. The real challenge for Apple now is to balance greater competition in its key markets with broader distribution in high growth areas, where its progress has been slower because of lower levels of spending power and different distribution norms.
To this end, it is having a second shot at the Indian market, where it failed in 2008. The iPhone 3GS is now being sold by Bharti Airtel and Vodafone Essar, after the last attempt to launch an Apple handset came to nothing. At that time, there was little prospect of a 3G network to support the iPhone, and the product was seen as too expensive in a country where over 95% of consumers have unsubsidized phones and prepaid deals. Even more crucially, Bharti and Vodafone failed to secure strong distribution for the handset ‘ nearly all Indian phones are sold through retailers, not by the carriers themselves.
It is not clear whether any of these problems have been sorted out this time around, although the 3G network should be somewhat closer, with auctions to be held next month. Until those systems are available the 3GS will use its EDGE connection. Once they have 3G networks, cellcos expect to move towards new business models, offering premium data services to help cushion ultra-low prices for GSM voice services. This should make high end smartphones more appropriate to their businesses, but we would not expect the two carriers to add significantly to Apple’s sales in the first year.
This is mainly a strategic foothold for them in anticipation of their 3G networks. The iPhone is famous for encouraging uptake of mobile data, but is unlikely to have this magical effect until there are decent networks, especially with a price tag between $650 and over $1,000 ‘ hugely high for the Indian market.
Closer to home, the iPhone also has extended US distribution via an expanded deal with retailer RadioShack, now offering the phone nationwide. Between March 28 and April 10 it will offer a special price of $95 for the 3G model and $195 for the 3GS, with two-year AT&T contract.
Meanwhile, the iPad’s pre-orders are going well ahead of its launch date on April 3. Those who have pre-ordered the tablet will receive it on day one, but others will have to wait until after April 12, suggesting initial stocks have been exhausted by the early birds. However, Apple has so far not secured any other carrier support, apart from AT&T, which could hamper international roll-out of the Wi-Fi/3G version (the first shipment will be Wi-Fi only, with AT&T’s product coming in late April). Meanwhile, Apple is also reported to be struggling to get the wide range of content partners on board as promised, with some publishers balking at its stringent terms.
AT&T will be casting an interested eye over a new piece of research, by Kantar, analyzing the likely impact of the loss of the iPhone exclusive on T-Mobile Germany ‘ one of the only sole rights deals left apart from AT&T’s, though some countries, like China, currently have only one iPhone carrier for other reasons. Kantar shared the results of its study with telecoms.com. It found that TMo grew its share of the contract mobile market from 26.2% to 30.1% over the course of 2009 and more than 40% of the carrier’s contract subscriber additions during the second half of that year bought the iPhone. That gave it market share gains against Vodafone and O2. Also, 44.4% of users churning to TMo contracts did so for the iPhone, and only 18% for Nokia devices. All this shifted TMo’s demographic towards younger, high spending users, compensating for losses to E-Plus and others in prepaid. Although German smartphone uptake is slow compared to most European major markets, the iPhone users do spend more than those with other phones ‘ even though, overall, Vodafone still has the highest ARPU.