Shares of Apple Inc. rose more than 3 percent on Thursday as investors bet on strong demand for its media-playing iPhone, almost a week after its U.S. launch, and speculation mounted over plans to sell the device in Europe.
Analyst estimates for iPhone sales in its first weekend run as high as 700,000 units and investors are expecting that momentum to continue.
AT&T Inc., the exclusive U.S. provider for the phone, said it had virtually sold out of the device in that time, though neither company has provided sales data.
“The stock is obviously anticipating very very strong sales for the iPhone and very good follow-through sales,” said Andy Hargreaves of Pacific Crest Securities. “The stock isn’t going to be a one-month wonder.”
Apple has said it will start selling iPhones in Europe this year and in Asia in 2008, but gave no further details.
European media reports this week have said Apple may be close to deals with carriers in France, Germany and Britain, a three-country strategy that would mimic the launch of its popular iTunes online music store in Europe in 2004.
Apple shares have increased more than 50 percent since the company unveiled in January the cell phone that combines Web browsing with the music and video playing capabilities of its best-selling iPod device.
“People are anticipating strong sales to continue through next year,” said Hargreaves. “If you don’t believe that’s true then definitely the stock is expensive. we’re kind of on the side that the momentum will continue.”
Hargreaves has a 12-month price target of $130 for the shares. That does yet not include full expectations for events such as widening iPhone distribution to electronics retailers including Best Buy.
Hargreaves said he expects Best Buy to start selling the phone in time for back-to-school shoppers.
Investors are also keeping close watch for news on how quickly Apple is able to replenish stocks of the phone and indicators of its financial impact. Research firm iSuppli said on Tuesday the phone would generate a 55 percent profit margin, after hardware and manufacturing costs.
In Europe, wireless operators including Vodafone Group Plc.,T-Mobile, owned by Deutsche Telekom and Orange, owned by France Telecom have been cited as potential iPhone partners.
Telefonica’s 02 said on Thursday that it had not signed a deal with Apple after reports that it was poised to clinch the first European agreement in what would be a blow to Vodafone, which operates in multiple countries.
“It would be a somewhat of a disappointment” if Vodafone did not reach a deal with Apple since it is such a large carrier size, Hargreaves said.
Apple shares were up $3.18, or 2.5 percent, to $130.35 on Nasdaq in the early afternoon, after trading as high as $131.75 earlier in the session. AT&T shares were down 31 cents to $41.19 on the New York Stock Exchange.
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Germany’s biggest Apple retailer is getting 1,000 enquiries every day about buying the new iPhone, which is expected to go on sale towards the end of the year, the retailer’s head told .
“Fifty-seven thousand interested people have already registered with us,” the head of retailer Gravis, Archibald Horlitz, told Germany’s Tagesspiegel. “Every day, we get about 1,000 more.”
Horlitz said almost 58 percent of those interested in buying the much-hyped iPhone—which incorporates an iPod music player, Web browser and email software—said they would consider switching operators if necessary.
Vodafone, T-Mobile and O2 have all been named in media speculation as likely candidates to get an exclusive or shared deal to sell the iPhone.
Horlitz said he expected Gravis would also be allowed to sell the iPhone in its 29 German branches. “I assume that we’ll be part of it,” he said.
Apple Germany was not immediately reachable for comment. Apple has declined to reveal any details regarding how it plans to sell the iPhone in Europe.
The iPhone went on sale for the first time in the United States on June 29 and analysts estimate up to 700,000 were sold in the first weekend. In the United States, the iPhone is exclusively available through operator AT&T.
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The portion of network revenues demanded by Apple is believed to have been behind Vodafone’s decision not to sign up as the exclusive partner for the iPhone in the UK.
That contract is understood to have been won by O2 although the mobile phone operator stressed that no deal has yet been signed.
… Apple is not just making money through sales. It is demanding a slice of the revenues the wireless networks make from usage of the device. It is also restricting content that can be accessed.
In the past, mobile operators have cajoled handset manufacturers into putting buttons on their phones that access the network’s own internet portal, where users can download games or buy music. With the iPhone, however, all the power rests with Apple.”
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Despite a hefty price tag of either $US499 or $US599 ($582 or $699), depending on size of the memory, analysts say Apple has sold between 310,000 and 700,000 of the gadgets since its US launch on June 29.
Now the question is which European countries, and crucially which operators, will be first to benefit from the much-hyped device that combines the wildly popular iPod music player with a mobile telephone, email and internet access.
Apple would limit the launch of iPhones in Europe this year to France, Germany and Britain. The rest of the continent would follow suit with Asia next year.
O2, the British unit of Spanish telecommunications group Telefonica, was set to be the first European mobile phone operator to reach a deal with Apple over the device.
A day earlier, T-Mobile the mobile arm of German telecommunications giant Deutsche Telekom, had beaten rival Vodafone in the battle to win marketing rights for iPhone in Germany.
A spokesman for O2 dismissed them as “speculation”, saying it had “not signed a deal with Apple”.
France Telecom, another potential candidate, has also remained silent.
There is also speculation about the price of the new iPhone. Internet rumours suggest it will cost E899 or E999 ($1429 or $1588), far more than in the US, although specialists predict a cost of between E400 and E500.
Another question is whether the iPhone will be equipped to use the 3G network that European operators have spent so much money on — in the US, it only uses the slower 2.5G network.
Despite these concerns, the author of the first European study on the impact of iPhone on the continent, Stephane Dubreuil of Sia Conseil consultancy, said operators were engaging in a “real battle” over the device.
The product “has such an attraction that it will enable them to win new clients over their competitors”, he said, adding: “This is typically a product that firms prefer to see among their own, not among the competition.”
Apple has never hidden the fact that it would choose market-leading operators, but only on the condition they accept its demands - which may demand sacrifices from the firms involved.
Mr Dubreuil said the “real revolution” of iPhone is the appearance for the first time of a telephone that “short-circuits the operator and establishes direct contact with the client”.
The prospect “concerns” European operators and might force them to revise their economic models, he said.
Apple has put its iTunes platform at the heart of the iPhone, allowing clients to buy music, video and games content. In doing so, many sources of mobile phone revenue now pass from the operator to the phone maker.
With AT&T, iPhone’s exclusive distributor in the US, the situation is different. There, the mobile phone operator keeps the majority of the revenues from telephone communications.
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Considering that the UK actually received its first iPhone back in January and was being on even as far back as August of 2006, it’s no wonder that Gordon is sick to the back teeth writing about the damned thing!However, it seems that Apple feels it still hasn’t received enough space on our news pages and so it appears that the (still unconfirmed) joint deal with T-Mobile and Vodafone, which seemed to have been confirmed by iPhone hackers, may not have told the whole story.
O2 may be after a slice of Apple’s iPhone pie (or should that be the other way around?). Of course while more competition can only be a good thing and should inevitably lead to a reduction in price of the rather pricey handset (assuming Apple won’t enforce a set one), we can’t help but think that it would be nice if either Apple, or one of the networks, would actually confirm or deny one or all of these claims currently flying around. Or at the very least give us a UK release date?
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It seems that O2 has beaten its rivals in the battle for the exclusive rights to offer Apple’s iPhone in the UK. It would be the mobile phone industry’s most sought-after deal of the past few years and a major success for O2 and its 18 million customers.
If everything goes well, the iPhone will be on sale by Christmas, and O2 considers it a key weapon in its mission to win and retain customers. There are also ongoing negotiations with mobile phone retailers such as Carphone Warehouse to sell the iPhone - after a period of exclusivity with O2. The expected retail price will be £300.
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On Monday the GSM Association (GSMA), which represents the operators, released a study it had commissioned from analysts at Ovum. It showed that allowing 3G to be used over the 900MHz GSM spectrum band — a process known in the industry as “refarming” the spectrum — would let an additional 300 million people in Asia, Europe and Africa have access to the more advanced mobile technology. 3G currently operates around 2000MHz, but employing lower frequencies would allow transmission over greater distances, as well as better indoor penetration.
A 3G network operating in the GSM band would give 40 percent greater coverage than it would at 2100MHz — leading to a reduction in cost. Making 3G data services more cost-effective would, of course, help fend off rival technologies such as mobile WiMax — currently enjoying its greatest success in developing countries — but, interestingly, Ovum’s study “does not attempt to address the potential competitive effects of refarming”, according to the GSMA.
O2 and Vodafone currently use the 900MHz band for their GSM voice services, and both companies have previously called for refarming to be allowed. However, analysts say that, if those two operators were allowed to refarm their 900MHz spectrum for 3G services, rivals like T-Mobile and Orange — both of which use the higher frequency 1800MHz range for their GSM services — might object. The subject of 3G and the cost of its delivery is a sensitive one for operators, because of the multi-billion-pound cost of their licences.The Ovum study calls for international co-ordination in the opening up of the 900MHz band, particularly due to the interference problems that could otherwise arise. “900MHz is one of the most used spectrum bands in the world and regulators must be careful to avoid interference with existing GSM services or interference across national borders,” said Stewart Anderton, principal consultant at Ovum.
Tom Phillips, the GSMA’s chief government and regulatory affairs officer, said that “national governments need to co-ordinate their spectrum policies to enable the widespread rollout of HSPA [enhanced 3G connectivity] in the 900MHz band.”
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Apple is understood to be demanding that its European mobile phone partners hand over a significant proportion of revenues generated by the iPhone and restrict the content that users can access.
The portion of network revenues demanded by Apple is believed to have been behind Vodafone’s decision not to sign up as the exclusive partner for the iPhone in the UK. That contract is understood to have been won by O2 although the mobile phone operator stressed that no deal has yet been signed.
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Mobile phone firm O2 is on the verge of agreeing to become the exclusive seller of the Apple iPhone in Britain.
It is planning to launch the phone in the run-up to Christmas.
Apple will limit iPhone’s European launch this autumn to Britain, France and Germany. It will then launch in other parts of Europe and Asia next year.
There has yet to be official confirmation of the O2 deal. A spokesman today said that O2 had “not signed a deal with Apple”. Apple also declined to comment.
The European iPhone would operate on slower 2.5 generation mobile networks, not the 3G infrastructure of companies such as Vodafone.
The handset, which was launched in the United States on Friday, comes with a built-in iPod music player and an internet browser.
The touch-screen phone is likely to cost around £400 on top of a long-term contract with the mobile operator as it will not be subsidised — standard for the British market.
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Though it’s been widely reported that T-Mobile will be selling the iPhone in Germany,and Telefónica’s O2 mobile is the more likely partner for Apple.
“O2 is set to be the first European mobile operator to reach a deal with Apple for its much-hyped iPhone. Apple is to limit iPhone’s European launch this autumn to the UK, France and Germany. It will follow elsewhere in Europe next year, when it will also launch in Asia.”
Carolina Milanesi, research director at consulting firm Gartner, said an iPhone launch in three European markets could make sense as no one operator covers the entire continent. Apple would logically deal with operators with most customers in each of the three markets. Orange leads in France, T-Mobile in Germany, and O2 in the UK.
Ms Milanesi said Apple would be under pressure to launch the iPhone in other European countries soon after the French, German and UK markets because otherwise it could upset potential customers.
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Apple Up on iPhone Sale Expectations
