PARIS: European telecom operators can't afford to miss out on selling Apple's new iPad but after their experience with the iPhone, they are warier
of Apple's clout and want to protect networks and profits from the new gizmo's risks.
The iPhone's success makes the iPad a must-have for operators because it may revolutionise the tablet market, and because turning away the iPad risks future iPhone business with Apple. But much has changed since mid-2007 when Europe's carriers, eager to differentiate themselves and boost usage of the mobile Internet, jockeyed for exclusive contracts to distribute the iPhone, often agreeing to tight restraints imposed by Apple on everything from handset subsidies to advertising.
Now operators are taking a much more careful approach to try to ensure the iPad will really help them make money. They want to prevent an iPhone redux where Apple captured most of the value -- not only by selling the device but also by hawking downloadable mobile software, games, and services through its Application Store -- reducing the role of the telecom operator to that of a simple data pipe.
"The operators are disenchanted with Apple," said Virginie Lazes, analyst with investment house Bryan Garnier. "They are starting to complain that they build and invest in the network yet they don't get a piece of the jackpot of mobile services." As a result, European operators are tamping down expectations for the iPad as they begin to weigh the offers, contracts, and subsidies that they will offer with it.
For operators, the business case for the iPad is simply less attractive than for the iPhone or a smart phone because they won't earn revenues from voice calls or texting, say analysts and executives who requested anonymity because they were not authorised to speak about ongoing negotiations with Apple. Nor is the iPad likely to be a competitive advantage for operators since Europe's tougher consumer protection laws make it tough for Apple to sign exclusive distribution deals here as they have in the United States with AT&T. The iPad goes on sale in some European markets at the end of April.
One way operators can protect their profits and networks would be not to subsidise the iPad as they have the iPhone. Not only did Apple charge operators more for its iPhone than other smartphones, the California-based company also dictated how much operators had to subsidise the phone to consumers. For example, France Telecom's exclusive contract required it to subsidise 310 euros of the 3G iPhone's 400-500 euro price, according to documents released when French regulators outlawed the iPhone exclusivity. Such subsidies obviously boosted sales of the iPhone, yet weighed on the operator's profit margins.
Analysts say the iPad could be sold without a subsidy from telecom operators, in which case its sales are likely to be more modest than the iPhone and it could remain a niche product. Nils Katla, who heads Telenor's strategy in the Nordic region, said Telenor was interested in selling the iPad but was still debating how.
of Apple's clout and want to protect networks and profits from the new gizmo's risks.
The iPhone's success makes the iPad a must-have for operators because it may revolutionise the tablet market, and because turning away the iPad risks future iPhone business with Apple. But much has changed since mid-2007 when Europe's carriers, eager to differentiate themselves and boost usage of the mobile Internet, jockeyed for exclusive contracts to distribute the iPhone, often agreeing to tight restraints imposed by Apple on everything from handset subsidies to advertising.
Now operators are taking a much more careful approach to try to ensure the iPad will really help them make money. They want to prevent an iPhone redux where Apple captured most of the value -- not only by selling the device but also by hawking downloadable mobile software, games, and services through its Application Store -- reducing the role of the telecom operator to that of a simple data pipe.
"The operators are disenchanted with Apple," said Virginie Lazes, analyst with investment house Bryan Garnier. "They are starting to complain that they build and invest in the network yet they don't get a piece of the jackpot of mobile services." As a result, European operators are tamping down expectations for the iPad as they begin to weigh the offers, contracts, and subsidies that they will offer with it.
For operators, the business case for the iPad is simply less attractive than for the iPhone or a smart phone because they won't earn revenues from voice calls or texting, say analysts and executives who requested anonymity because they were not authorised to speak about ongoing negotiations with Apple. Nor is the iPad likely to be a competitive advantage for operators since Europe's tougher consumer protection laws make it tough for Apple to sign exclusive distribution deals here as they have in the United States with AT&T. The iPad goes on sale in some European markets at the end of April.
One way operators can protect their profits and networks would be not to subsidise the iPad as they have the iPhone. Not only did Apple charge operators more for its iPhone than other smartphones, the California-based company also dictated how much operators had to subsidise the phone to consumers. For example, France Telecom's exclusive contract required it to subsidise 310 euros of the 3G iPhone's 400-500 euro price, according to documents released when French regulators outlawed the iPhone exclusivity. Such subsidies obviously boosted sales of the iPhone, yet weighed on the operator's profit margins.
Analysts say the iPad could be sold without a subsidy from telecom operators, in which case its sales are likely to be more modest than the iPhone and it could remain a niche product. Nils Katla, who heads Telenor's strategy in the Nordic region, said Telenor was interested in selling the iPad but was still debating how.
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