Thursday, 26 November 2009

T-Mobile and 3 not in the iPhone club, but Tesco allowed in – United Kingdom

The iPhone is perhaps the biggest current headliner grabber within the consumer mobile handset market. However, it still only picks up a tiny percentage of the global handset market; comparatively 5% of what Nokia managed during Q209. However, this is based upon one type of handset which has moved from an Apple ‘cult’ following to what is becoming a must have gadget for both youth and tech savvy non-youth markets.

Within the UK, 3 out of 5 MNOs currently have iPhone agreements and now Tesco Mobile, an MVNO of O2, has joined their ranks. This is potentially embarrassing for both ‘3 UK’ and T-Mobile UK as Tesco Mobile is in comparison to them, simply an MVNO. It is also worrying for Orange and Vodafone as Tesco plans to beat them to market, being in time for Christmas.

The question is why Tesco and not the 2 remaining MNOs and why in competition to Orange and Vodafone. Potentially this is a really clever move by Apple or a trashing of their recommended retail price. Within the product life cycle the early adopters and similar have already purchased their iPhones, as too have those waiting for a post-launch deal or for the early adopters to act as their guinea-pigs. This means that iPhone sales need a pick me up and the agreement with Tesco allows for a massive marketing blast onto the UK high-street, or more precisely, into the biggest retailer’s nationwide footprint.

Tesco has not clarified their selling angle for the iPhone but the hints are that the unit price will be kept as is but the tariff for using the handset will be more akin to a Tesco theme. Meaning that their will be no price war attrition against Apple, but their will be a hotting up of associated competition between operators selling their packages around the iPhone. This also contributes to answering the question of why Tesco. Tesco Mobile is an MVNO joint venture of O2 and Tesco Plc. O2 until now has had a monopoly over iPhone sales but Orange and Vodafone are soon to hit this cosy arrangement. It is possible to argue that those who want an O2 iPhone have already got one and that O2 has run out of time to catch the stragglers and the harder to convert market. Bringing in Tesco Mobile with the MVNO theme allows for the iPhone churn from other networks to continue, which benefits O2 as Tesco is their MVNO.