O2 is understood to have agreed a margin on the retail price - to be confirmed tomorrow - but will return to Apple as much as 40% of any revenues it makes from customers’ use of the device.

The price of the combined phone and iPod can be changed by Apple at any time, as happened recently in the US. Out of O2’s share also comes a commission and further revenue share with Carphone Warehouse, which is understood to have secured the right to be the sole independent retailer of the device on behalf of O2.

Carphone appears to have been drafted in because of Apple’s fears that O2 did not have a big enough presence in the UK even with its sizeable store portfolio which was enlarged by last year’s acquisition of The Link stores.

From The Guardian

Making this is a temporary sticky.. this is too incredible…

The other part of the puzzle is: what contracts will be offered? I am quite sure O2 won’t be making an actual loss on the service they provide, and Edge isn’t that expensive to roll out. In 3 years (the apparent duration of the exclusive), O2’s 3G license returns could be transformed by being fully used nationwide. Even if it’s a “loss leader”, the commitment is only for 3 years, and UK carrier market shares could be transformed by then.

40% is huge; perhaps O2 realised that Apple might be able to give huge discounts on the handset in exchange for such a revenue share - perhaps even “selling at a loss” just like all the carriers do with all handsets. Subscription accounting lets Apple do this.

It seems apparent that AT&T got the best phone deal from Apple. When SJ said that T had faith in Apple and ‘‘I won’t forget’.  So whatever the share revenue is with all the worlds carriers it won’t be as good for them as it is for T. It also seems that Apple is pitting carriers against each other in a bidding war for the iPhone rights… Good for shareholders but you can be sure that the telcos hate it. They are not used to not be in control

WOW, that’s huge, I almost sold my TEF(sp) stock to add to my AAPL

I really haven’t digested this, but I think it shows that Apple is moving full speed towards a service provider business model, and for now O2/Telefonica are happy to be a transitional wholesale supplier for 3+ years.

I actually think it’s the right thing for a carrier to do; they have to accept that the old business models will change, and it’s better to lead the changes than to hang on to legacy revenues for an extra year or two.

One of the options was for Apple to become a Mobile Virtual Network Operator. Apple’s international reach would quickly make them a major competitor stealing the most profitable customers for the high roaming charges currently enjoyed by European carriers. I don’t know what discounts an MVNO receives, but I would think 40-60% is very plausible. So O2 could reasonably say to themselves: what deal would we give to an MVNO? If we give the equivalent deal to Apple in exchange for a fat margin on phone sales, that’s got to be good. (Promotes our brand, gets the same revenue as the MVNO route plus the phone sales).

O2 is understood to have agreed a margin on the retail price - to be confirmed tomorrow - but will return to Apple as much as 40% of any revenues it makes from customers’ use of the device

O2 will also have to pay Apple 600 Pound Sterling for each iPhone sold in the UK !!! 

Com-on, 40% is just absurdadurd !  This simply can’t be true.

[quote author=“xumbra”]

O2 is understood to have agreed a margin on the retail price - to be confirmed tomorrow - but will return to Apple as much as 40% of any revenues it makes from customers’ use of the device

O2 will also have to pay Apple 600 Pound Sterling for each iPhone sold in the UK !!! 
Com-on, 40% is just absurdadurd !  This simply can’t be true.

Yes, it could be true - if Apple are selling the iPhone to O2 at a deeper discount thus giving the network a fat margin on the unit sale.

[quote author=“sleepygeek”]I really haven’t digested this, but I think it shows that Apple is moving full speed towards a service provider business model, and for now O2/Telefonica are happy to be a transitional wholesale supplier for 3+ years.

I actually think it’s the right thing for a carrier to do; they have to accept that the old business models will change, and it’s better to lead the changes than to hang on to legacy revenues for an extra year or two.

One of the options was for Apple to become a Mobile Virtual Network Operator. Apple’s international reach would quickly make them a major threat with the high roaming charges currently enjoyed by European carriers. I don’t know what discounts an MVNO receives, but I would think 40-60% is very plausible. So O2 could reasonably say to themselves: what deal would we give to an MVNO? If we give the equivalent deal to Apple in exchange for a fat margin on phone sales, that’s got to be good. (Promotes our brand, gets the same revenue as the MVNO route plus the phone sales).

perfectly put SG…. and they keep the competitors out

[quote author=“Tommo_UK”][quote author=“xumbra”]

O2 is understood to have agreed a margin on the retail price - to be confirmed tomorrow - but will return to Apple as much as 40% of any revenues it makes from customers’ use of the device

O2 will also have to pay Apple 600 Pound Sterling for each iPhone sold in the UK !!! 
Com-on, 40% is just absurdadurd !  This simply can’t be true.

Yes, it could be true - if Apple are selling the iPhone to O2 at a deeper discount thus giving the network a fat margin on the unit sale.

You mean Apple may have concluded that the T-deal was a disaster as it provided too small a direct-incentive for T and therefore Apple will change the nature of the matter towards a real subsidisation ?

With AT&T delivering only 10% revenues to Apple, Apple can take away the other 90% in a few years time. So T is clinging to an old model with only 10% share, making a competitor of Apple at the end of the exclusive. So perhaps T only wants to keep iPhone from the competitors for 3 years, not promote it. The O2 purported deal puts the two companies side by side with common interests, and closely aligned revenues. So Apple is much less likely to want to go it alone at the end of the exclusive contract, and O2 much more likely to want to sell lots of iPhones.

10% has been the amount everyone has been using for the ATT deal. But we don’t officially know what it really is. For that matter the 40% isn’t something we know for a fact. It’s not likely Apple will ever tell us either.

[quote author=“willrob”]10% has been the amount everyone has been using for the ATT deal. But we don’t officially know what it really is. For that matter the 40% isn’t something we know for a fact. It’s not likely Apple will ever tell us either.

To the extent SEC requirements about disclosure compel the company to discuss its material contract arrangements, much info will be available in quarterly filings. Will Apple attach a contract copy to the filings? No. But with a little time and effort, much info can be gained.

UK site silicon.com says 1/3 of over 700 respondents said they would switch networks in order to be able to buy an iPhone in the UK.

Suddenly you sense the other networks getting a bit less cocky in their dismissal of the impact of the iPhone, and a little more kudos to O2 for realising that the loss from not having the iPhone to sell is greater than just the lack of new subscribers to the device. Its the dreaded churn of high-spending smart-phone users to another network,

Vodafone will rue the day they laughed at Apple’s demands.
———————————————————————-
Poll: One in three of you would switch networks for an iPhone
Good news for 02, perhaps?
By Steve Ranger
Published: Monday 17 September 2007

silicon.com readers are willing to swap mobile networks to get hold of an iPhone, according to exclusive research.
In our poll of more than 700 readers, a third said they would switch mobile network operators to get their hands on Apple’s mobile phone.
Reports suggest there could be an announcement as soon as tomorrow on which mobile operator will offer the device - with 02 currently the front runner.
But whichever mobile network ends up offering the iPhone, it will be hoping that customers of rival operators are willing to switch providers to get hold of the gadget.
Apple recently revealed that it sold one million of its iPhones in just 74 days - compared to the two years the iPod took to hit the same sales milestone.
Since the launch it has also announced a significant cut to the cost of the iPhone in the US, as well as unveiling its iTunes Wi-Fi Music Store last week which the iPhone and new iPod touch will be able to use.
The device could quickly find its way into businesses with staff pushing employers to adopt the device, according to analysts.

I may have fallen behind the discussions lately, but could this be why they dropped the iPhone price? Maybe SJ knew about impending subscriber rev in these european deals and did a simple DCA and realized they can make piles more cash if they increase sales volume.

[quote author=“willrob”]10% has been the amount everyone has been using for the ATT deal. But we don’t officially know what it really is. For that matter the 40% isn’t something we know for a fact. It’s not likely Apple will ever tell us either.

  Another thing to consider is the price of the available plans offered tomorrow. It’s hard to make an exact comparison with other plans but the AT&T voice plus infinite data plan offered with the iPhone is about $20/month less than nearly equivalent plans offered by AT&T with other heavily subsidized smartphones. It will be interesting to see if the available O2 voice/data plans are discounted relative to comparable offerings for other phones.

[quote author=“superbaka”]I may have fallen behind the discussions lately, but could this be why they dropped the iPhone price? Maybe SJ knew about impending subscriber rev in these european deals and did a simple DCA and realized they can make piles more cash if they increase sales volume.

I think Apple dropped the price when they saw the economies that could be achieved at huge volume and the demand that would develop at a lower price point. I’m sure the European launch of the product was a factor.