Apple 2.0

Covering the business that Steve Jobs built

Is the iPhone really the Paris Hilton of mobile phones?

September 7, 2009: 8:32 AM ET
Photo: parishilton.com

Photo: parishilton.com

"iPhone makes for worldwide loss" reads the headline in Sunday's Guardian, whose editors apparently missed the flurry of similar pieces that appeared three weeks earlier.

"Telcom operators hurt selling iPhones" was how Reuters handled the story, back on Aug. 17. "Who's screwing who? (sic)" asked Shanzai.com the next day. And from ITWire.com: "iPhone -- The Paris Hilton of mobile phones?"

That last one actually dates from Dec. 5, 2008, when the newsletter from Strand Consult that coined the Paris Hilton metaphor first appeared.

In fact, all the iPhone-is-bad-for-carriers stories that have turned up in the trade press since the third week of August -- and we counted at least a half-dozen -- stemmed from the same nine-month old Strand press release: "iPhone - an operators worst friend."

The money quote in that provocative report, picked up by every reporter who stumbled across it this year and last:

"Our research shows that there is not one single Apple partner in the world among the mobile operators that has increased their overall turnover, profit and market share due to the iPhone." -- John Strand

Does Strand, the Danish CEO of Strand Consult, know something that the carriers who are fighting to get their hands on the iPhone -- or desperately trying to hold on to their exclusivity deals with Apple (AAPL) -- don't?

Before we meet Mr. Strand, let's take a look at what some of the carriers are saying. From AT&T's (T) Q2 earnings call:

"The day of the [iPhone 3GS] launch was the best sales day ever for our AT&T retail stores and our website, att.com, had its largest order day ever...

"For the full second quarter, AT&T iPhone activations totaled more than 2.4 million. 35% of those activations were for customers who were new to AT&T. Better than half of the upgrades previously had no data plan. Better than 80% of the upgrades were from a non-iPhone device or a 2G iPhone, increasing ARPU [average revenue per unit] and in the case of 2G upgrades, eliminating our revenue share with Apple...

"And the iPhone subscriber characteristics continue to be terrific. ARPUs are significantly above our post-paid average, churn is much lower, recurring margins continue to be high and our iPhone customers continue to have very strong MPVs."

AT&T has made similar comments every quarter since the iPhone launched. And AT&T is not alone. O2 told the Guardian that, overall, it has benefited from the iPhone. And on Monday Reuters reported that Softbank -- Japan's No. 3 carrier and the iPhone's exclusive carrier there -- once again passed No. 1 DoCoMo in the number of new subscribers signed up in August.

We don't pretend to have the expertise of John Strand -- who has been covering the industry for 14 years and has, as you are about to hear, never made a mistake -- but we wonder whether carriers might make more money in the long run from getting and holding new subscribers than they make from iPhone sales.

Anyway, here's Strand in his own words, speaking to a reporter from Mobile Industry Review outside the Nokia booth at February's World Mobile Congress in Barcelona. He's got an unique take on the App Store (there's nothing new there, he says) and he can't resist using that Paris Hilton line one more time.

UPDATE: We have obtained, courtesy of John Strand, "The moment of truth: a portrait of the iPhone," the 105-page statement of his views on the iPhone that he released on Aug. 17. Like his 2008 press release, it features a list of 10 points, in this case the 10 largest myths about the iPhone:

1)  The iPhone drives data traffic into mobile operators networks
2) The iPhone helps operators attract new customers
3) The iPhone is good business for mobile operators
4) The iPhone is dominating the mobile services market
5) App store is a huge success that has revolutionised the services market
6) There is money to be made by developing applications for the iPhone
7) It is iPhone customers that are generating the majority of online mobile surfing traffic
8) The iPhone has a large market share
9) The iPhone was the first mobile phone with a touchscreen
10) The iPhone is a technologically advanced mobile phone

To obtain your free copy of Strand's report, click here.

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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