Europe : Martin Garner ( inset ), Director at Ovum, comments: "In an uncharacteristically low-key event this morning, Apple and O2 announced the launch of the iPhone in the UK.

• The device is the same as the 8Gb model currently shipping in the US.  It will be priced at £269 including VAT and will be available on 3 new O2 tariff plans set at £35, £45 and £55 per month over a minimum 18 month contract.
• All of the plans will include unlimited data (subject to a “large” fair use policy) and will also include use of the Cloud’s 7,500 WiFi hotspots with seamless hand-over.
• The iPhone will be sold through Apple, O2 and Carphone Warehouse stores giving around 1,300 retail points throughout the UK.
• In order to support the launch O2 is upgrading its GSM network with EDGE (which sits in between GPRS and 3G), is training an iPhone expert for every shop and is dedicating 1,000 customer care staff to the iPhone.
• With the device comes a new application which is access to the iPhone store.  Users can find, preview, choose and purchase music and, now, download it over the air when connected to WiFi.
• The iPhone will hit the stores on November 9th

This launch was slightly less than we were hoping for.

The device itself has not moved on in the light of initial feedback, notably on the non-removable battery and the lack of 3G.  On 3G, Steve Jobs said that the chipsets place too heavy a load on the battery so the battery life would be too short.  Once there are better chipsets, the iPhone will have 3G, and he implied that this would be late 2008.

If this is not to be a problem, then European users (who are used to very good coverage) will require excellent EDGE and WiFi coverage.  O2 promised 30% population coverage with EDGE at launch, growing after that to an unspecified ceiling. 

We think that this is simply inadequate and will frustrate a lot of users who take their iPhone to their parents’ house in, for example Cornwall, at Christmas and say “look how great this is for web browsing …”.

AT&T was heavily lambasted as the weak link in the chain when the iPhone started shipping in the US earlier this year.  O2 looks to be heading for the same fate here.

Will the shortcomings of EDGE coverage be compensated for by WiFi?  O2 said that their research shows that up to two thirds of usage would be on WiFi, either at home or out and about.  Certainly the deal with the Cloud is good for users and will help in urban areas and in people’s houses, but it will not mean much in rural areas.

The tariffs look sensible.  It is good to see O2 using unlimited data plans, and it promised that unlimited data would be made available on its other contract plans shortly. One small niggle is that many users will have to accept fewer voice minutes than their existing £35 plan, or buy a more expensive plan, if they want to use an iPhone.

O2 and Apple were very tight lipped on the issue of revenue sharing and the various figures that are being circulated in the press were neither confirmed nor denied.

The price of the device is also quite sensible.  It is slightly more expensive than in the US, but some of this is because the UK price includes VAT where the US price does not include sales tax.

There are several areas where questions remain:

·          How much is this all costing O2 and how long will it take to break even.  This will be of great interest to the City ahead of wider European launches due from Q1 2008.

·          Steve Jobs said that the choice of O2 was cultural more than economic.  Yet we understand that it is not using O2 in Germany, and is using a different carrier again in France. Something does not ring true here.

·          Various handset vendors have started producing user interfaces that head in the direction of the iPhone, and it looks as if a new device segment will emerge with the iPhone heading the charge.  But how big is this segment and how competitive will the other vendors be?

Inset is Martin Garner, Director of Wireless Intelligence of Ovum who comments about the launch of the iPhone.