The Non-Exclusive Test for Apple

Implications: Apple adding 12 Latin American countries to the Telefonica agreement after contracting America Movil will test the carrier influence on device pricing, distribution channels and network quality.

Analysis:

Regarding the 3G iPhone launch, AT&T Mobility’s CEO discussed driving more volume and pursuing a mass market.  He also commented about exploiting the “magical price point” and alluded to the RIM Blackberry, Palm Treo and Samsung BlackJack at $199.  For Apple, the U.S. market will probably not be significantly different because AT&T raised the unlimited data plan from $20 to $30 month to cover the $200 device subsidy over a 2-year customer contract.  There could be price competition for the lowest unlimited data plan as Verizon adds the Palm Centro and Sprint Nextel promotes Samsung’s new Insight model.

More significantly, Apple contracting both Telefonica and America Movil for the Latin America affects the iPhone market space.  The controlled iPhone distribution by exclusive country changes from Telefonica’s O2 in the UK, Deutsche Telecom in Germany and Orange in France.  Telefonica and America Movil can compete for customers with the iPhone price and network coverage.  For Apple, the test will be the impact of non-exclusive carriers on sales results.  Does the carrier’s network coverage and broadband capability make the key difference for customers?  Will the carrier’s distribution channels and subscriber base attract iPhone users that buy MobileMe and patronize the Apple Store?  Apple continues with the expansion target of 25 countries with Vodafone in ten new markets, TeliaSonera in seven countries and Orange across the EAFE markets.  The different markets will show how Apple increases their 5% global market share of smartphones and the overall impact on Apple service revenues.