Feeds

The iPhone arrives, but is O2 being taken for a ride?

'You want... how much?'

Website security in corporate America

Analysis Yesterday Apple announced that O2 would have the exclusive rights to their iPhone in the UK, with punters paying £279 for the phone and signing up to an 18-month contract.

But how much is O2 paying for its five-year exclusive, and can it really make any money out of it?

Estimates of how much O2 is going to share with Apple vary between ten per cent (the Financial Times) and 40 per cent (The Guardian). Then again, it's perfectly possible for both figures to be correct: the smaller cut being given to Apple when an existing O2 customers gets an iPhone, the larger figure used when a punter changes networks just to get thier hands on an iPhone.

AT&T pays $3 a month when one of its customers takes up an iPhone, but $11 a month when someone switches, so a similar arrangement would be unsurprising for O2.

O2's ARPU (Average Revenue Per User) is around £23, so 10 per cent of that would be £2.30 while 40 per cent comes to £9.20 - not incomparable with what AT&T is paying, if a little higher. Still, that would be in keeping with the "high cost of doing business here", as Mr. Jobs put it when justifying the price of the handset.

It also matches nicely the additional cost of the £35 a month iPhone tariff, as reader Dan put it:

But 200 minutes and 200 texts usually cost £25 a month on O2...

Seems like the end user is paying the 40 per cent revenue that goes to Apple.

Of course the un-metered data tariff will affect ARPU, especially as O2 expects the majority of access to come from Wi-Fi hotspots where fair-use capping is unlikely.

Around 30 per cent of O2's ARPU comes from data, but only 2.6 per cent of that is data as we would understand it - the rest is SMS traffic which is unlikely to change significantly for iPhone users (though the inability to send to multiple recipients, or type messages one-handed, might reduce traffic). So O2 stands to lose at least 60 pence in data charges per month, per iPhone user.

The iPhone doesn't support MMS (Multimedia Messaging Service), but O2 users only send an average of half a message a month, so assuming the iPhone user would also have received half an MMS per month, that's another 45 pence off the ARPU.

The real money-spinners in mobile data come from games, ringtones and graphics which users download and pay for on their mobile bill, but the iPhone won't support any of those. While O2 is expected to share its call revenue with Apple, you won't find O2 pocketing a percentage of the iTunes take.

As reader Andrew Fenton puts it:

So that's 279, then [£]35*18 [months], for a total of over 900 quid.

For that you could get yourself a Nokia N95 on a 12 month Flext35 contract, with double the included minutes, and unlimited 1.4mbit 3.5G.

What's more, you'd still have enough left to buy an 8GB iPod Nano. And an entire PC.

Internet Security Threat Report 2014

More from The Register

next story
Brit telcos warn Scots that voting Yes could lead to HEFTY bills
BT and Co: Independence vote likely to mean 'increased costs'
Phones 4u slips into administration after EE cuts ties with Brit mobe retailer
More than 5,500 jobs could be axed if rescue mission fails
ISPs' post-net-neutrality world is built on 'bribes' says Tim Berners-Lee
Father of the worldwide web is extremely peeved over pay-per-packet-type plans
New 'Cosmos' browser surfs the net by TXT alone
No data plan? No WiFi? No worries ... except sluggish download speed
Radio hams can encrypt, in emergencies, says Ofcom
Consultation promises new spectrum and hints at relaxed licence conditions
Google+ GOING, GOING ... ? Newbie Gmailers no longer forced into mandatory ID slurp
Mountain View distances itself from lame 'network thingy'
Blockbuster book lays out the first 20 years of the Smartphone Wars
Symbian's David Wood bares all. Not for the faint hearted
Bonking with Apple has POUNDED mobe operators' wallets
... into submission. Weve squeals, ditches payment plans
prev story

Whitepapers

Secure remote control for conventional and virtual desktops
Balancing user privacy and privileged access, in accordance with compliance frameworks and legislation. Evaluating any potential remote control choice.
WIN a very cool portable ZX Spectrum
Win a one-off portable Spectrum built by legendary hardware hacker Ben Heck
Storage capacity and performance optimization at Mizuno USA
Mizuno USA turn to Tegile storage technology to solve both their SAN and backup issues.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
The next step in data security
With recent increased privacy concerns and computers becoming more powerful, the chance of hackers being able to crack smaller-sized RSA keys increases.