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iPhone a “flop” in the UK

December 7, 2007

iPod Maybe flop is too strong a word, but the early indications are that iPhone sales in the UK are bright rather than incandescent.

It’s all relative. Still, the hysteria in the US has not been repeated here.

From The Register, 23 November:

“Reliable channel sources tell us that Apple’s exclusive UK operator has activated just 26,500 iPhones since its launch two weeks ago, below the company’s expectations.

This doesn’t reflect the true number sold … but the gross is unlikely to be significantly higher. It’s far lower than first-weekend sales guesstimates of 100,000, a figure reprinted by tabloid and broadsheet alike.”

I’m not honestly surprised. I can think of lots of reasons:

Price

This is the single biggest factor. The first year cost of an iPhone to an American buyer is $1,118.88* which translates to around £550 at current exchange rates. Now that’s quite a lot, but not compared with the £689** it actually costs a UK purchaser to own and run an iPhone on the O2 network for 12 months.

Note that the basic O2 contract only includes 200 free minutes a month (cf 450 for the basic AT&T contract in the US) so the UK cost for the equivalent service is probably around £750-£800. In other words, the iPhone is 45% more expensive to the UK buyer.

Now compare with the cost of buying a typical alternative high-end phone in the UK. The equivalent twelve month outlay if you plump for a Nokia N95 on a 400 monthly minutes contract is just £360. And in many ways the N95 comfortably out-specs the iPhone (eg HSDPA, 5MP camera, onboard GPS), even if the UI is not as cool and unique as the latter’s.

Market norms

It’s really part of the point above but Brits are used to getting their phones free when they subscribe for a contract. Having to pay a considerable up-front sum on top of a hefty monthly outlay goes against the UK phone market culture. It rankles.

Similarly, and unlike in the US, Brits are used to being able to get their phones unlocked so they can use the carrier of their choice. Being locked in to O2 also rankles. It’s not that O2 is hated, like AT&T is in the US, it’s the principle. Also, O2 does not provide the best signal strength in all areas.

Note that the French are able to buy their iPhones unlocked entirely legally, for an additional €100. Not surprisingly many are taking up the option and sales there look to be considerably brisker than in the UK. Sales in Germany are lacklustre.

Negative press about “bricked” iPhones in the US

This is related to the lock-in point above, in that the instances of iPhones getting bricked in the US are connected with attempts to break the carrier lock-in. But the point here is that Apple are seen as having penalised their customers unduly harshly, even if the latter did breach the licence terms. It’s all about whether a corporation projects an image of caring for their customers. The brickings damaged Apple’s brand, crucially before the iPhone’s UK launch.

The Yanks had it months ago

By the time the iPhone came to the UK it no longer presented a world first opportunity to get ones mitts on a piece of gadget history. The buzz at secondary launch locations was never going to be as big as for the original launch in the US.

Teething problems with reception

There have been reports of early adopters in some areas having to send their iPhones back because of signal problems. For some reason Matlock seems to have been singled out as a particular trouble spot. We know O2 coverage is weak in some places anyway, but this is different: iPhones are getting weaker signals than other phones on O2 even when the two are held side by side. This may be a technical fault due to a glitch in the system that conserves battery when the phone is on standby.

Timing of UK launch

Launched too early in the run-up to the festive season? Maybe sales will pick up as XMAS shopping gets into full swing.

Rumour that 3G version is around the corner

Reliance on EDGE for Internet browsing is definitely a drawback, but the rumours of a forthcoming 3G version are stronger now than when the iPhone first launched in the US.

Waiting for the post XMAS price drop

Apple have already annoyed early adopters in the US by dropping the price too soon after launch, creating a sense of having exploited their own greatest enthusiasts. Who would like to hazard there won’t be a significant price drop in the UK shortly after the XMAS rush?

*$399 for the phone from Apple (free shipping), $59.99 pm for basic AT & T basic plan (450 monthly mins)

**£269 for the phone from O2 (free shipping), £35 pm for O2 basic plan (200 monthly mins)

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