iPhone to Enter More Complex Market in Europe

Wireless carrier O2, owned by Spain's Telefonica, is leading the race to become the exclusive iPhone provider in the UK, according to press reports.

However, the company has denied cutting a deal with Apple (Nasdaq: AAPL). A variety of other carriers also reportedly are making headway in vying for contracts in other European countries: T-Mobile in Germany, Orange in France and Vodafone (NYSE: VOD) in a number of other areas.

Regardless of which carrier wins, the iPhone is entering a much different competitive landscape when it launches in Europe this fall, John Jackson, vice president, enabling technologies research, with Yankee Group, told MacNewsWorld.

For one, consumers there are more accustomed to a service-rich mobile environment catering to devices with many bells and whistles.

"You have the likes of Nokia (NYSE: NOK) and Sony Ericsson, who have competitive device portfolios in the market in a significant way," Jackson noted. "Those brands are very competitive in Western Europe."

Who Cares About Carriers?

Judging from the fact that the iPhone is sold out at many retailers six days after its launch, consumers in the U.S. have had no qualms about changing wireless carriers to use the coveted device. That is the bet AT&T (NYSE: T) made by becoming the exclusive provider of the iPhone in the United States.

"In the U.S., Apple is taking on Sprint (NYSE: S) and Verizon," with this launch, Jackson said.

U.S. consumers have grown weary of and inured to the advertising of wireless carriers that claim to be the best and most powerful, Jackson noted.

"It is no longer sufficient to try to differentiate on the quality of the network," he explained, "touting the fewest dropped calls or attaching whatever superlative in front of your network. That horse has been flogged."

Thus, the relationship between AT&T and Apple is one of mutually beneficial convenience in the U.S. In a market where all carriers have put their stakes in the ground relating specifically to network strength, Jackson explained, the advent of a feature-rich device is extremely disruptive.

Another Kind of Disruption

In Europe, the iPhone's launch will create a disruption of another kind, said Jackson.

"That is a considerably more complex market," he said. "Apple still has a red-hot product that no operator will want to be without."

The European wireless carrier market is dominated by large, super-regional carriers, Jackson explained. They have been "reasonably enlightened" about marketing their value-added services to consumers, instead of speaking exclusively about coverage and reliability. Thus, consumers in Europe are more likely to see the iPhone as one in a wide range of feature-rich wireless handsets that they can choose among.

Western Europe "is an environment with a little competition," Jackson said.