iPhone - where next?

The iPhone launch has sparked more debate in our office than any recent news from the tech sector. Advocates and detractors have been at loggerheads by the watercooler getting their point across....

What seems certain is that it will be the hottest christmas seller of '07 - the £269 price tag will deter few of the first wave of buyers. 200k unit sales in the first two months predicted by O2 CEO seems over-cautious, analysts have forecast closer to 400k units - closer to the 1m sold in the US during the first 74 days after launch. That stat made it the fastest selling phone in history - beating the RAZ-R by some margin.

However - phone sales are like games console sales- for a true reflection of demand we have to look beyond the initial PR-fuelled surge. Here is the nagging question...

- Will UK consumers be prepared to fork out £269 for a phone when they are familiar with paying zero for a subsidised handset? (even the Prada phone is available with a £35 tariff)

Anyone signing up today will be paying at least £880 for the phone and their contract - in return they get a measly 200 monthly free mins..

Wisely - Apple are creaming the premium from the market - but I predict that by March next year there will be a substantial price drop - maybe as far as £199. Why? it is widely known that O2 swallowed a 10-20% contract revenue share deal with Apple in order to guarantee an exclusive UK distribution deal. Given that they are making so little from the initial sale and contract - they must be looking for critical mass in terms of a user base, to achieve that, the entry price will have to reflect the 2nd wave demand before the competitors start to divert attention from the iPhone.

Rightly - O2 are in it for the long game, they recognise that iPhone buyers are not your regular phone users, they are the holy grail of HVC (High value customers) - the mobile users with higher average bills. As soon as Apple iron out the current teething problems (lack of flash player and 3G connectivity amongst others) usage levels should unlock excellent revenue potential for O2, from a user base that are very, very unlikely to switch network in current conditions.

So - don't be a surprised to see a price drop next year, but don't be surprised to see the iPhone dominate the 'must have' list for some time to come...
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