Business Watch: O2 thanks Apple

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Matthew Key’s 2007 deal with Apple to sell the iPhone exclusively on the O2 network in the UK is starting to look like it has paid off for the network – big time.

While the industry faces a squeeze as cash-strapped consumers pare back their spending, the lustre of the iPhone has yet to fade, it seems.

At least that’s according to Key, chairman and chief executive of Telefónica Europe, O2’s Spanish parent company.

As evidence, O2 reported that it has now sold over a million iPhones in the UK. The exclusive deal helped it defy the economic gloom by reporting a 10 per cent rise in revenues over the Christmas quarter.

O2 also underlined its top spot in the UK market, by adding 390,000 net new mobile users in the last three months of 2008, taking its customer base to some 19.5 million.

Key was in characteristically upbeat voice as he unveiled the figures to the market. “The mobile phone is part of people’s everyday behaviour,” he beamed.

“The other advantage that we have is that it is not a big ticket item; you use it every day and it’s a few pence or the call is part of a bundle you have already bought. It is not like buying a car or a three-piece suite.”

Nevertheless, a clear trend is emerging, whereby a significant number of customers are trading-down from 18-month fixed term contracts to “no commitment” rolling monthly tariffs, prepay, or SIM-only deals.

The flip side of that trend, is punters being lured to trade up to so-called smartphones, which can access the internet, send emails and do all manner of stuff beyond calls and texts.

For Key, perhaps unsurprisingly, the iPhone is the ultimate smartphone. He claims sales are continuing to speed up despite the fact the handset has been on the market for quite some time now.

“In the middle-market, some have traded down but some have traded up,” he said.

“And frankly if you look at the iPhone there has not been anything as compelling before in the market for people to trade up to.”

Full article in Mobile News issue 434 (March 9, 2009).

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