No Word On IPhone's Europe Distributor, Sparking Speculation"

LONDON (Dow Jones) -- Capturing the elusive high-end consumer is the biggest lure behind the exclusive deal to distribute Apple Inc.'s much-anticipated iPhone in Europe, industry observers said Thursday.

The iPhone "will attract a certain group of high-spending, tech-friendly consumers that have been the focus of every European operator because of the higher ARPU they generate," said Matthew Hatton, a senior telecom analyst at Yankee Group, a research firm. ARPU is short for average revenue per user, a key performance benchmark for wireless operators.

Speculation that Apple's about to unveil the name of the carrier it will work with in Europe was revived Thursday after Dutch technology magazine Bright reported, without naming sources, that Vodafone Group is most likely to bag the deal.

Apple and Vodafone are still in talks about a possible European distribution deal, the report said, but the negotiations have stumbled on the number of the devices that Apple wants Vodafone to buy.

In the past few months, it's been thought that T-Mobile would emerge as the likely winner of the prestigious contract. Deutsche Telekom is the parent of T-Mobile.

Vodafone's shares rose 2.5% in London morning trading. Deutsche Telekom added 0.7% in Frankfurt.

In the U.S., AT&T is Apple's exclusive carrier partner for the iPhone's Friday launch. Because the iPhone's set to come to Europe by the end of the year, analysts expect a deal to be announced any time now.

"We were even expecting an announcement earlier. So the talks must have stumbled on something," said Hatton.

The iPhone, which combines the features of a phone, a digital music player and a personal organizer, is squarely in the media spotlight this week. It's slated to go on sale at 1,800 AT&T retail stores and about 200 Apple stores on Friday evening.

Pricing for the service starts at $59.99 a month. The phone comes in two versions, a 4-gigabyte model priced at $499 and an 8-gigabyte model that will cost $599.

iPhone to boost AT&T revenue

While the potential revenue boost for the chosen European operator is hard to quantify, Strategy Analytics has done some forecasting for the U.S. market. There, it estimates that the first 3 million iPhones that AT&T expects to sell over the next three quarters will bring it $1.4 billion in extra revenue

Strategy Analytics' Phil Kendall said "there's real money to be made" from distributing the iPhone in Europe.

"It's going to appeal to more affluent, more tech-oriented consumers who will provide a lift to revenue," he said, adding that some subscribers are likely to switch carriers to get the iPhone.

But he cautioned against setting expectations too high, saying that because Vodafone has 200 million customers, in large part in Western Europe, a potential iPhone deal is "not going to transform their market share."

The European launch is also expected to generate less frenzy than the U.S. one.

"Our view is that most volumes will be in the U.S. ... Apple doesn't have as strong a distribution network in Europe," said Neil Mawston, also of Strategy Analytics.

Strategy Analytics has forecast that Apple will grab 10% of the market for so-called smart phones in 2007.

Another potential stumbling block in Europe is the price of the device, which has not yet been announced. Yankee Group's Hatton pointed out that European subscribers are used to spending less for their mobile phones than their U.S. counterparts.

"How deep in the subscriber base the iPhone penetrates will depend on how heavily it's subsidized," he said.

Nokia may be instructive. Its high-end N95 model, which features a 5-megapixel camera and a GPS locator as well as all the usual e-mail and phone capabilities, can be had for less than $150 with some contracts in the UK.

(END) Dow Jones Newswires"

Posted to the site on 28th June 2007