Blog Post

Analysts Warn Telcos: iPhone Won't Give You More Subscribers

The merged T-Mobile and Orange mobile operator could be among several UK mobile players looking to sign iPhone distribution agreements after Telefonica-owned O2’s exclusive contract runs out this month.

But Danish research firm Strand Consult has warned: don’t be fooled by the iPhone hype

Vodafone also signaled its interest in a recent earnings call, but a report from Strand — which we mentioned last month — says telcos should consider “whether the iPhone is such a good business case from a shareholder point of view” and look at the losses its carriers are making.

The report, The Moment of Truth – a Portrait of the iPhone, argues it’s only a myth that the iPhone is good for business, despite all the continued interest: “Not one (operator) has increased its market share, revenue or earnings as a result of introducing the iPhone…With this is mind, it is important that one does not become completely mesmerized and dumbstruck by the hype surrounding the iPhone.”

The report warns Orange and T-Mobile — which Strand’s “sources” say will be distributing the iPhone after September — they won’t get the same benefits O2 has enjoyed as the exclusive provider. “The iPhone will no longer be a differentiaing factor in itself,” it says, which will force UK operators to duke it out with lower and lower priced offers to win market share.

Strand also points out that AT&T (NYSE: T) (NYSE:T) — still the exclusive US carrier — receives 60 percent of its iPhone purchases from existing customers, which means it is “cannibalizing” its other products. That’s not to mention the subsidies companies pay Apple: AT&T paid about $720 million in subsidies to keep the iPhone during Q209, when its revenue fell 16 percent in the same period.

So, while the iPhone is a “trendy” and attractive phone, Strand recommends that operators concentrate on widening their product ranges instead of concentrating efforts on it. For Strand, Apple (NSDQ: AAPL) is treating operators not as partners but like a “naive friend that is helping Apple reach its goal.”