Orange heads for iPhone goldmine (maybe)

With Orange now selling iPhones in the UK, analysts have forecast that the company will have more than one million customers using the Apple device by the end of next year. If this occurs, the market research firm Mediacells claims that Orange could gain £750,000,000 in revenues from these subscribers.

This huge revenue boost, according to Mediacells, will be driven by Orange's iPhone ARPUs being nearly 30 per cent more (£10 per month) than non-iPhone users. 

However, the £750 million in additional income does not account for the cost of purchasing the devices from Apple. Mediacells estimates that the cost to Orange for each iPhone will be around £250 per device, leading to Orange still generating more than £500 million of revenue from selling the iPhone on its network in the UK.

Mediacells' chief executive, Brad Rees, said: "Selling the iPhone remains the best way for operators to get customers to part with more cash, even in a recession. The fact that Orange has not undercut O2's tariffs with its own iPhone offering just goes to demonstrate Orange's confidence that it can generate new customers and reduce churn through selling the iPhone."

But this forecast, which might look wildly optimistic to some, is already under pressure given that one of Europe's largest supermarkets, Tesco, has agreed with O2 to resell the iPhone as part of its MVNO deal. Tesco, known for undercutting rivals on price, is being positioned by market watchers to be the first to open a price war with Orange and Vodafone (when it eventually has access to the handset) that will bring carnage to what has been a ‘steady state' retail price environment since the launch of the iPhone.

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