Mobile networks should study 10pc iPhone deal

5 Sep 2007

Rumours that European operators have agreed to share with Apple 10pc of iPhone’s new subscriber access revenues as well as revenues from content have been welcomed by an analyst that urges other mobile operators to utilise the model to boost non-voice ARPU (average revenue per user).

It was reported in recent weeks that a handful of major operators agreed to share 10pc of revenues with Apple and this model has met with the approval of the US head of research at Analysys, Jason Kowal.

“If these rumours are true then it represents the first known case of a handset vendor (or any other partner) successfully negotiating a direct share of mobile transport service revenues ,” said Kowal.

“Even if the real details are never released, the upside for Apple’s operator-partners is substantial, given the Apple user community who download music, images, films, TV programmes and videos in a way no other community of users does.

“These users will quickly become passionate, sophisticated, high-traffic and high-ARPU (Average Revenue Per User) customers,” added Kowal.

Kowal says that on the surface, such deals are exactly what the mobile industry needs in order to achieve strong growth in non-voice ARPU (average revenue per user).

He said that provided operators continue to open up the mobile web browsing experience, keep tariffs simple, and maintain control of handset distribution, non-voice ARPU should increase considerably in coming years, from 19pc of total ARPU today to over 32pc by 2012.

While Apple is unique, Kowal continued, mobile operators need to be very careful as to how the next wave of partnership deals are structured. In the iPhone case, both the operators and Apple have similar goals – to broaden the appeal and scope of what is essentially a semi-closed community of high-value users.

However, the next generation of potential partnership combinations, for example with manufacturers like Nokia with its Ovi service, or content houses such as Google (Gphone), Yahoo!, or Disney, could bring a very different and potentially dangerous dynamic.

Few organisations bring the combination of shared interests to an operator offered up by Apple, Kowal said. In negotiating these deals now, if an operator surrenders too many of its leverage points with customers (handset distribution, billing, location/usage information), it could find itself limited to the role of dumb pipe, a scenario that most operators want to avoid. Smaller operators in particular need to proceed with caution.

“Fortunately for mobile operators, there is only one Apple, and there are unlikely to be other OEMs that could demand or offer so much,” Kowal explained. “However, other alliances may arise, possibly involving major players like Blackberry manufacturer RIM, Nokia (Ovi), or Google, which require careful observation.

“More importantly, operators should act quickly to improve the mobile Internet experience on sustainable terms by more aggressively partnering with sources of content and software on their own. This will bring compelling applications to the handset on terms that keep the operator in the centre of the mobile value chain,” Kowal warned.

By John Kennedy