Calling on a cheaper iPhone

Apple's iconic handset is relatively new to the region and companies that invested to bring it to the market should be allowed to let it run its lifecycle.

Apple may have thought that it was just doing recession weary consumers a favour. But the company's announcement that it plans to sell a basic version iPhone for a knock-down price may leave its distributors in the Gulf Co-operation Council (GCC) looking a tad sheepish in the eyes of their "locked in" customers.

On June 8, technophiles across the world focused on San Francisco for the annual Worldwide Developers Conference to see what new features Apple's latest iconic iPhone 3GS smart phone might carry. With much fanfare, it was revealed that customers will enjoy a longer battery life, a 3 megapixel camera, a digital video recorder, and hands free voice control. Among all the razzmatazz of the launch, Apple's less noteworthy announcement - that it is to release a basic 8GB iPhone in the US for $99 (Dh363) - was overshadowed by its new super-slick creation.

The pricing move, however, is a major shift in company strategy for Apple, as in the past they have been accused of being too pricey. The cost reduction from $199 to $99 represents an unprecedented move from the tech team based in Santa Clara County. Moreover, the new asking price, which will attract a whole new segment of customers to the world of smart phones, is in line with entry level offerings from other handset makers, including Blackberry's creator, Canada's Research In Motion (RIM).

Despite this and unlike the launch of many other Apple products the announcement failed to grab the attention of many consumers. That is, of course, unless you are in the GCC, where iPhones are relatively new to the market thanks to Apple's exclusive distribution partners, such as etisalat in the UAE and Mobily in Saudi Arabia.

One would expect the news of price cutting to be met with delight in this part of the world, especially within a young tech savvy population such as the UAE. Unfortunately for customers though, it is highly unlikely etisalat will match Apple's $99 price tag.

Etisalat and Mobily are likely to favour the status quo their current iPhone agreements present the operators considerable opportunity to bolster their domestic revenue. Value-added products and services such as those offered by the iPhone provide higher margins and consequently lucrative revenue lines. The UAE is particularly ripe for the appropriation of new technologies. The sale of 3G-enabled phones in the Emirates increased by more than 62 per cent in 2008 to 1.5 million handsets, according to GfK Group data.

When the Apple iPhone was launched in February 2009, it cost Dh3,090 in the UAE and etisalat's price plans started at Dh199 per month. This included 125 minutes of talk time, 125 text messages and 500 MB of data.

An etisalat spokesperson emphasised the importance of the entire package, "The elements of the package and the benefits being offered along with it are as important as the base price. For instance, etisalat is providing a higher bandwidth option for all the packages, which will be useful considering that iPhone users will require high-bandwidth applications that can be best utilised on etisalat's advanced 3.5G network."

On the face of things, it seems like an unfair deal for those customers recently tied into long term deals with the operators. But in reality, etisalat is only exercising its right as an exclusive distributor. It offered a popular product, albeit on long-term contract, to eager customers at a price they were willing to pay at the time of release. Also, it is a well-known fact that tech products are quickly updated and reduce in price accordingly. For disgruntled customers who only recently signed payment plans with etisalat this consolation is a somewhat bitter pill to swallow.

It will be interesting to see if the UAE's telecommunications regulator, whose mandate it is to ensure fair competition and protect the best interest of the consumer, will deem it necessary to pull etisalat aside and have a quiet word in its ear. The answer to that is - I don't think so. The iPhone is relatively new to the UAE market and companies that invested to bring it here should be allowed to let it run its lifecycle. The situation reminds me of an old saying - when the apple is ripe it will fall. I guess it is not ripe yet in the UAE.

Trevor McFarlane is editorial manager of Oxford Business Group, Abu Dhabi.