The new 3G iPhone will be available on top-up contracts as part of Apple's new strategy to boost consumer take-up of the device

Michelle Donegan

June 11, 2008

3 Min Read
iPhone Goes Pay as You Go

In a bid to blanket the globe with the new iPhone, Apple Inc. (Nasdaq: AAPL) has changed the way it sells the already iconic device. (See iPhone II: Touching 3G .)

When the 3G iPhones go on sale on July 11, they will be available for the first time on pay-as-you-go price plans and from more than one operator in some markets, such as Australia, Italy, and the U.K. Operators will subsidize the new models, and the service revenue sharing requirements do not seem to be imposed on the new 3G phones. And of course, the $199 price tag for the 8 GB model is half the price of the original EDGE devices. (See Apple's 3G iPhone Tease.)

All of these changes aim to make the iPhone more attractive for more people. Apple’s new strategy started to take shape last month as multiple operator deals were struck in countries like Italy and India. (See Telecom Italia Gets iPhones, Telecom Italia Gets iPhones, and Vodafone to Sell iPhones.)

“There’s clearly a big shift in thinking,” says Ben Wood, analyst at CCS Insight . “It’s no longer a premium product and it has come in line with accepted sales practices in the service space. Apple also had to rethink the way the transaction is conducted.”

With the new iPhones, customers will have to sign a contract in the store, rather than taking the device home to sign up for services online. “This is so carriers can be sure you’ll pay your $50 per month ... so they know they’ll get their subsidy back,” explains Wood.

And in Italy and the U.K., Telecom Italia (TIM) and Telefónica UK Ltd. have announced that they will offer the 3G iPhone with pay-as-you-go plans as well as with contracts. But neither operator has revealed how much the iPhone will cost with prepaid plans.

The move to offer prepaid iPhones will make the devices more attractive to those consumers who do not want to be tied to one operator by a lengthy contract.

The proportion of mobile customers on pay-as-you-go plans is significant in some markets. In the U.K., 60 percent of mobile users are on prepaid plans. In Italy, 84 percent of Telecom Italia’s customers are prepaid, while Vodafone Italy , the other iPhone operator partner in the country, has 90 percent of its customers on prepaid plans.

“The value of the pre-pay market is changing dramatically... More high-end phones are offered on pre-pay,” says Wood. “It’s not like the old days where you get a cheaper device for talk and text. A number of consumers are frustrated by having to sign up for 18 to 24 months.”

AT&T Inc. (NYSE: T) is not going down the pay-as-you-go road, however. Its two new tariffs require two-year contracts. (See AT&T’s iPhone Pain.)

O2, which is still Apple’s exclusive operator partner in the U.K., has many different contract plans for the new 3G iPhone. The operator will actually offer the 8GB iPhone for free when customers sign up monthly tariffs of £45 ($88) or £75 ($147), which includes unlimited data and WiFi access from The Cloud and BT Openzone. The 8GB model will cost £99 ($194) on monthly tariffs of £30 ($59) and £35 ($69). (See O2 Prices iPhone.)

For the 16GB iPhone, O2 will charge £159 ($312) on £30 ($59) and £35 ($69) monthly tariffs, and £59 ($116) on the £45 ($88) tariff. On the £75 ($147) monthly tariff, the phone will be free.

For business customers, O2 will offer the device for free with most of its business tariffs on 24- to 36-month contracts.

Just as with the previous iPhone, the devices will be available in the U.K. from O2 and Apple retail stores and Carphone Warehouse Group plc (London: CPW).

— Michelle Donegan, European Editor, Unstrung

About the Author(s)

Michelle Donegan

Michelle Donegan is an independent technology writer who has covered the communications industry for the last 20 years on both sides of the Pond. Her career began in Chicago in 1993 when Telephony magazine launched an international title, aptly named Global Telephony. Since then, she has upped sticks (as they say) to the UK and has written for various publications including Communications Week International, Total Telecom and, most recently, Light Reading.  

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