O2 be in England now that the iPhone is there

The Apple hype machine went into overdrive yesterday as that nice Mr. Jobs turned up in London to announce the not-so imminent arrival of his wunderkind offspring – the iPhone – to the shores of good old Blighty.

Nailing rumours that have been circulating for weeks, it was finally announced in a confirmation of the industry's worst kept secret, that O2, the UK mobile operator now owned by Spain's Telefonica, has secured the deal to be the exclusive network and sales contractor for the iPhone for at least two years.

The device will finally be available to UK customers with effect from November 9. As is usual for transAtlantic imports, the iPhone will, of course, cost more here than it does in the US. Indeed, it is priced at a 35 per cent premium over the American market and it will also be more expensive on the O2 network than on AT&T's network in the US.

The 8Gbit/s handset will be priced at £269 and customers will also have to sign-up to an 18-month contract with O2. Three calling plans will be available costing either £35, £45 or £55 a month. The £35 a month deal provides the user with 200 minutes of airtime and 200 texts, the £45 comes with 600 minutes and 500 texts and the top-of-the-range £55 product provides for 1200 minutes and 500 texts. All three plans include what is described as "unlimited data transfers".

What is remarkable about the contract with O2 is that the carrier is said to have agreed to remit to Apple a massive 40 per cent of call revenues made on the device.

The rumoured 10 per cent deal would have been revolutionary but at 40 per cent it has driven an Eddie Stobart road train through the financial model that has pertained in the mobile industry since the sector began. Never before have operators paid a percentage of call revenues to manufacturers for the privilege of providing their handsets. What will happen hereafter is anyone's guess, but the genie is out of the bottle now and it'll never go back in. And let's not forget, although O2 will actually be paying that 40 per cent to Apple, it is the subscriber who ultimately foots the bill – hence the cost of becoming an iPhone user.

The iPhone model being introduced into the UK is the same as the one currently available in the US. Thus it is not a 3G phone but will operate instead on O2's EDGE and GPRS networks. However, at present,they provide coverage to just 33 per cent of the population of the British Isles.

Back in the US of A, Apple has already lopped close to 30 per cent of the cost of the handset and it remains to be seen whether, and, if so, how quickly the price will drop in the UK. No doubt that will depend on the number sold in relation to Apple's internal sales targets. It is believed that the company is looking to shift 10 million iPhones by the end of next year.

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