The Short Names

Now that UK wireless carrier O2 has lost its exclusive contract to carry the iPhone, it looks like nearly all of the British networks, may end up offering the device. The Guardian.co.uk reports that Britain’s Orange is expected to begin selling the iPhone on November 10, a day after O2’s 2-year contract ends. Last week, Kevin Russell, CEO of the country’s smallest network 3, said he expects to sell the iPhone sometime in 2010, while Vodafone (NYSE: VOD) UK, will sell the device starting next year.  (T-Mobile UK, pending regulatory approval, is in the process of merging with Orange).

There’s no question that the iPhone is red hot right now, in Europe as it is in the US. According to the Independent.co.uk, half a million people are “understood” to have already registered interest in the device at Orange’s web site, a number that CEO Tom Alexander said had “gobsmacked” him.

But Forrester analyst Thomas Husson raises an interesting issue in his latest blog post. For European carriers, the iPhone, and especially one that is offered on a non-exclusive basis, is “not a panacea” and offers “growing but still limited reach.”

Husson notes:

—European operators have to work through a more complex equation to figure out if they would be able to recoup the investment of subsidizing the iPhone for their users.
—iPhone subsidies in Europe are nearly 300 euros, while the additional revenues it brings through more expensive voice/data packages is only around 10 euros iPhone/ user a month. That means a customer must be held for over 2.6 years to recoup the subsidy.
—Operators must also work out how to deal with the exploding network costs that the additional traffic brings.

Husson writes, “The [user] subsidy was really interesting in the context of an exclusive distribution agreement… It is less interesting now to say the least.” This is especially true if carriers decide to lower the price of the iPhone to better compete. For now, UK carriers are resisting a price war. Orange UK CEO Alexander told the Guardian that the carrier would look for other ways to add value such as pre-loading applications to the device or bundling it with accessories. But wasn’t the whole point of the iPhone to make it easy to load up any app you wanted? Cheaper iPhones here we come.