Published October 12, 2009

Apple to give others a bite at the iPhone?

But SingTel's default monopoly may stay if other telcos reject Apple's conditions

By WINSTON CHAI

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THE iPhone may be the apple of Singapore Telecom's eye. But its rivals may not share quite the same taste for the much-hyped touch-screen handset.

BT understands that Apple has been in discussions with other local operators about selling the iPhone, but talks remain deadlocked because of several contentious issues in the reseller contract.

Requirements to commit to high sales volume and revenue-sharing terms are believed to be making SingTel's rivals think twice before putting pen to paper.

'As long as the iPhone adoration continues, Apple wields the market power in the telco relationship, and will always be a tough negotiator,' said Aloysius Choong, a research manager with IDC Asia-Pacific. 'But in the coming years we should see the company shift towards a market- share focus, especially as it builds out its mobile portfolio.'

The impasse leaves SingTel with a default monopoly on the iPhone even though exclusivity is not a condition spelt out in its pact with Apple.

Singapore's largest operator was given first bite at selling the iPhone 3G in Singapore in August 2008 and this privilege was extended to the latest model - the iPhone 3GS - this July.

When contacted, Apple, StarHub and MobileOne declined to confirm whether talks have taken place.

But recent developments suggest Apple is increasingly leaning towards a multi-operator play to meet its aggressive sales targets for the iPhone.

This is the case in the UK, where O2's two-year iPhone stranglehold was broken last week when Apple agreed to let Orange and Vodafone sell the device.

In some markets, such as Australia, Canada, Hong Kong and India, multiple operators were given the right to sell the handset right from the start. And the iPhone's maiden outing in China is via a non-exclusive deal with China Unicom.

According to Morgan Stanley analyst Kathryn Huberty, Apple's market share could more than double if it adopts a multiple- operator approach in the top six iPhone markets that are still exclusive.

'We believe Apple's market share could rise to 10 per cent on average in a multiple-carrier distribution model, from 4 per cent today,' she said in a research note.

'We expect Apple to broaden iPhone carrier distribution over the next two years and believe this opportunity is under-appreciated by the investment community.'

While Apple's touch- screen gadget has undoubtedly been a worldwide consumer hit, its impact on an operator's bottom line is subject to debate.

Last month, Denmark's Strand Consult released a controversial report claiming the iPhone has had a negative impact on telcos worldwide.

The market analysis firm said its research showed none of Apple's operator partners have benefited from a sales, profitability or market- share standpoint.

And with Apple increasingly widening its distribution, Strand Consult believes existing iPhone partners stand to lose even more. 'These operators will lose the differentiation that the iPhone provided as more and more operators in each market start offering the iPhone,' the firm said in a 105-page analysis.

'When we examine an operator like SingTel in Singapore, their figures speak for themselves, and despite the fact that they state their iPhone customers give higher APRU (average revenue per user), the money SingTel has spent subsidising the iPhone has been extremely poor business for its shareholders,' Strand Consult said.