T-Mobile's mistake: closing a deal with Apple iPhone

Implications: - by closing an exclusive deal with Apple for distributing the iPhone, T-Mobile is opening the door for future lower earnings - an Apple deal is a short-sighted focus on acquisition numbers, but by giving away data and voice revenues to a supplier, other handset suppliers will see opportunities to do the same - the balance of power between operators and handset suppliers will therefore move into the direction of suppliers

Analysis: Deutsche Telekom closed a deal with Apple for exclusive iPhone distribution in Germany, Austria, Hungary, The Netherlands and Croatia. T-Mobile has agreed to give 10 percent of revenue from fixed-line calls and data communications generated by iPhone customers to Apple. Industry sources have told Reuters that T-Mobile will sell the iPhone for EUR 399 in Germany.

Revenues coming from mobile data are growing for wireless operators. Where customers will be continue to use their iPhone from T-Mobile, the coming years, T-Mobile will need to pay Apple increasingly as users will use more data services. As voice revenues are dropping, the relative share of data will increase. A deal as with Apple, will hurt T-Mobile's margins on it's fastest growing business. It seems T-Mobile has been focusing on acquisition numbers: this deal with lead to higher acquisition numbers. Also it will attract customers with a more innovative mindset: these customers are more data driven, leading to higher operator revenues. But again, by given away a part of these revenues, it will improves T-Mobile's revenues but hurt it's margins.

More: by offering a supplier a part of the core (traffic) revenues, T-Mobile is opening Pandora's box. Why would Nokia, Samsung, SonyEricsson and other handset suppliers not demand traffic revenues from operators when they come up with a new fancy handset? Vodafone wisely decided to keep a short-sighted opportunity outside the door for fear of moving the value chain model more in a direction which is advantageous for the handset suppliers. T-Mobile's deal will lead to a dimished role for the operator: a mere distribution channel who is even paying, in stead of receiving....

The absolute pain for T-Mobile will be limited in the short-term: no too many of the total T-Mobile customer pays will be able or willing to buy an expensive iPhone, but it's the long term where the pain will be.