UK set for three-way iPhone price war

Deal with Orange could result in price drop for iPhone handsets in the UK.
Vodafone on Tuesday announced it would start selling Apple’s popular iPhone in the UK from early next year, in a move that should bolster efforts to turnround the mobile operator’s ailing British business.

It means there will be three UK mobile operators selling the US technology company’s iPhone from next year: Vodafone, Orange and O2. Some analysts said a price war over the iPhone could ensue, making the relatively expensive handset more affordable for consumers. But the operators, if they increase subsidies for the iPhone so as to maximise sales, would face higher operating expenses. O2 , the UK’s largest mobile operator by number of customers, has been the exclusive British network for the iPhone since 2007. The end of the arrangement is a significant setback for O2. On Monday Orange, the UK’s third largest operator, announced a deal with Apple to sell the iPhone in Britain. Orange, unlike Vodafone, will be able to sell the iPhone in the run up to Christmas, which is traditionally the most important sales period for mobile phones. Vodafone, the UK’s second largest operator, admits O2’s exclusive iPhone deal hurt its British business. It was the largest UK operator until 2006. Unveiling its Apple deal on Tuesday, Vodafone said it would start selling the 3G and 3GS versions of the iPhone “in early 2010”. It added it would also sell the iPhone in Ireland, where O2 has also been the exclusive network for the handset. O2 began selling the iPhone in the UK in 2007, and used the handset to poach customers from rivals. It has sold more than 1.5m iPhones.

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However, the UK mobile market is preparing for a major shake up after plans for a merger between France Telecom’s Orange UK and Deutsche Telekom’s T-Mobile UK were unveiled earlier this month. The combined entity would become the largest UK operator by customer number, overtaking O2 and Vodafone. O2, which is owned by Spain’s Telefonica, said: “We always knew that iPhone exclusivity was for a limited period of time, but our relationship with Apple continues and will be an ongoing success.” The iPhone set a new standard in smartphones, or mobiles that double up as mini computers, partly because of its innovative touchscreen and web browser. Mobile operators covet the iPhone partly because customers can be persuaded to go beyond tariffs covering phone calls and text messages and pay for data-related services based on internet access.

Apple used the launch of the iPhone in 2007 to sign exclusive network arrangements in the US, France, Germany and UK. However, as it began selling the iPhone in other countries, Apple established arrangements under which more than one mobile network sold the handset.