Research Notes

Nokia “the iPhone business model” Killer

Apples entry into the mobile universe with their iPhone, must have brought out the wet dreams of every handset manufacturer, and not the nightmare scenario as many thought.
Apple had negotiated an airtime share deal, so that Apple receive a percentage of the revenue generated from each handset. In return for this share, the MNO’s who partnered with Apple then got the iPhone at a low price, besides the great honour of being associated with the Apple brand. iPhone

Now it can come as no surprise that the leading manufacturer, Nokia, just loves Apples iPhone business model, receiving a share of the revenue generated per handset.

With an installed base of more than 1 Billion handsets, and on average Nokia handsets generate 40-50% of the traffic in an MNOs net, Nokia could stand to receive a whole lot of revenue from Operators if they could get the MNO’s to sign up on a partnership. If Nokia on the other side could be persuaded to sell the handsets to the MNO’s cheaper receiving an airtime share, the scale of economy for the Operator would be a whole lot more interesting.

Apples brand is strong, but Apple’s target for the first 18 months is 10 million shipped handsets.
Compare this to Nokia’s expected shipments of +400 million handsets, for 2008 alone. For an Operator it would also make a whole lot more sense to partner with Nokia or any of the major manufacturers over Apple. Here size really matters.

Apple’s initial launch in the US, followed now by a much more modest reception in Europe must bring frowns on the faces of the Apple stockholders. For now Apple have not revealed any plans for launch in Asia, however gadget happy Japan and Korea with high ARPU figures must be like looking evermore tempting, as the European fairytale goes cold.

But we seriously doubt that the Apple iPhone will make a big impression on experienced mobile users, as found in Asia.
So where could Apple focus, and make their money in the mobile universe. Apple have an unique opportunity to make money of their iTune, much like Nokia will make of money their many new platforms ( LBS, OVI, Mosh, Medeo, Music Store etc). But even here Nokia has a much broader distribution of devices than Apple and would easily take Apple on and win.
Nokia’s latest comments point to the fact that Nokia is already taking all these steps, and basically killing of Apple before they will make their first footprint in the mobile world. The big question is if the Operators and Nokia can reach an agreement, and Nokia takes on some of the Operators risk by subsidising the terminals versus the airtime share.

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