The most interesting thing about Vodafone’s announcement this week that it has struck a deal to sell the Apple iPhone, is that it signifies an end to the exclusivity deals Apple has been so fond of.

Vodafone will be able to sell the device in ten countries: Australia, the Czech Republic, Egypt, Greece, Italy, India, Portugal, New Zealand, South Africa and Turkey.

But Telecom Italia Mobile (TIM) said on the same day that it too “has signed a deal with Apple to bring the iPhone to Italy later this year”. We can probably assume that the Vodafone deal didn’t extend to the UK and Germany because of the existing exclusivity agreements with operators (Telefonica O2 and T-Mobile) in those markets. And as Ovum analyst Steven Hartley points out, Italy is a bit of a special case.

“Italy has the second highest proportion of prepaid in Western Europe (87% in March 2008), far higher than any of the five major Western European markets. Given that the iPhone is likely to be available only to contract customers, the Italian market simply requires a different approach to attract sufficient customers,” Hartley says.

If this is the thinking, and it seems likely, then we can probably expect further markets where Apple needs to work with multiple operators to make the offering viable. After all, it’s long been rumoured that Apple gets something between a 20 per cent and 40 per cent revenue kickback from iPhone users in exclusive markets, but in a country dominated by less effluent prepay subscribers, how do you sell a gadget costing hundreds of Euros if its tied to one provider? It would be interesting to see if Apple has changed its revenue model as well, particularly given the slowing rate of adoption of the iPhone in Europe.

As for the introduction of a 3G device? Well that is a question still left to the imagination, with neither Voda nor TIM making any kind of comment. On the one hand, the fact that these operators are launching the device ‘later this year’ suggests that it will be a new model, but as Ovum’s Hartley also points out, the inclusion of India and Turkey in the list, neither of which yet have 3G, may raise some questions. However, both these countries do have EDGE networks, meaning that a 3G iPhone would be backwards compatible.

 
 
 
 
Will the sophomore version of Apple’s iPhone turn around softening demand for the iconic device?

The iPhone is now about 10 months old. The handset grabbed an impressive 17.4 per cent market share in the US during its first six months of existence and has so far sold 5.4 million units. But during the first three months of 2008, Apple sold only 1.7 million iPhones, a drop from the 2.3 million units sold in the last quarter of the 2007 calendar year. Yet the vendor still expects to sell at least 4.6 million iPhones over the next three quarters in order to meet its stated goal of selling 10 million total units by the end of calendar year 2008.

For a year, I’ve held onto a column by PC industry pundit John C. Dvorak that was dated March 28, 2007, three months before the iPhone’s introduction. At that time, he wrote, “There is no likelihood” that Apple could be successful in a business as competitive as the mobile phone industry. Dvorak suggested that if Apple were “smart it will call the iPhone a ‘reference design’ and pass it to some suckers to build with someone else’s marketing budget.”

Those were harsh words indeed, and they failed to sway Apple, which is now working to extend the reach of its fabled iPhone worldwide. Rumors are that the device will be introduced during coming months in countries as varied as Italy, Belgium, Australia, India, Singapore and perhaps even China. Many of those countries already have iPhones, albeit units that were bought in the US and illegally unlocked to run elsewhere. “Our view continues to be that this is a proxy for the worldwide demand of the iPhone,” said Apple COO Tim Cook, during an earnings conference call with analysts.

Nonetheless, iPhone sales outside of the US have so far failed to generate massive excitement, with some saying legal European sales have amounted to only 300,000-350,000 in each of the past two quarters. And demand is reportedly softening. The iPhone still has a tiny global footprint at around .06 per cent. In the UK, O2 and Carphone Warehouse recently tried to stimulate sales by reducing the price of the standard 8GB iPhone by £100 ($199) to £169 ($337), though they maintained the price of the 16GB model at £329. T-Mobile in Germany earlier cut the 8GB model’s price from Eur399 ($625) to as little as Eur99 with a two-year data plan.

Such price reductions play into Dvorak’s prediction, where he wrote that Apple would learn that good margins “cannot exist in the mobile handset business for more than 15 minutes.”

But falling prices may just reflect the fact that many potential iPhone buyers are holding back on making purchases as they await the arrival of the 3G version, which is expected to be released in the US on June 27, the anniversary of the iPhone’s initial introduction. Word of ongoing iPhone shortages in the US, Germany and the UK lend credence to the idea that the 2G version is on its way out. But will the 3G iPhone arrive with high-tier pricing (and high margins) as well as the same kind of buyer frenzy that accompanied the device’s introduction last year?

Though the iPhone is certainly a curiosity worldwide, legal international sales of the device have paled in comparison to sales in the US. At the recent CTIA Wireless 2008 convention, I had a prominent top executive of a well-known European firm ask me if I perceived a nationalistic bias on the part of US consumers who gave the Apple iPhone almost a hero’s welcome when it was unveiled last year.

Indeed, Apple has an almost cult-like following in the US, but its following elsewhere in the world is far less worshipful. So, it’s no surprise that iPhone sales in the US have been dramatically higher than in other parts of the world. What did surprise me about initial iPhone sales is how many US consumers were suddenly willing to buy an unsubsidized handset.

It will be interesting to see if US consumers, in particular, will jump as quickly for the new breed of touch-screen iPhone-wannabe devices hitting the market. The Samsung Instinct, unveiled by Sprint Nextel, will arrive in June at a less expensive price than the iPhone, and it already features 3G access over Sprint’s EV-DO Rev. A network.

Further, Nokia is developing its first touch-screen handset, codenamed Tube. Though Nokia has struggled to compete in the US, the firm’s strong positioning in Europe means the Tube could significantly outpace a 3G iPhone there.

Nonetheless, the iPhone appears to have a strong outlook, at least for the short term in its US stronghold. In the 15th semi-annual Taking Stock With Teens research survey, recently published by Piper Jaffray, 6 per cent of the US students surveyed reported that they own an Apple iPhone. That’s double the market share conveyed in Piper Jaffray’s fall 2007 survey. In addition, 9 per cent of the students said they intend to buy an iPhone in the next six months.

 
 
 
 
Virgin Media’s decision to become the first ISP to partner with the BBC and launch iPlayer on its own platform this week came as something of a surprise, given the kicking the controversial media player has got in the ISP community recently.

We’ve heard all the reports of ISPs wringing their hands over the potential explosion in traffic that iPlayer will generate, and that’s not just on the downstream, as one of the service’s options is to allow peer to peer downloading which will nobble the end user’s upstream capacity as well. Suddenly all those ‘unlimited’ traffic promises start to pose a very real problem for a country where the network infrastructure lagging behind that of its European peers in terms of capability.

Then again, Virgin is the one UK ISP striving to pull ahead of the pack in terms of capacity. While the rollout of BT’s 21CN is holding everyone else back, Virgin is promising upgrades to a more competitive 50Mbps. And more importantly it should not escape our attention that Virgin Media chief exec Neil Berkett, recently referred to the concept of net neutrality as “a load of bollocks” and said that anyone who didn’t pay Virgin a premium would have their content stuck in the slower internet “bus lane”.

Brits understand the concept of a bus lane somewhat differently but the point is clear, and it seems the Beeb has struck a deal along those lines, made more interesting by the fact that Virgin will eventually make the service available via the EPG on its own set top box.

As Ovum analyst Michael Philpott points out, it’s a move that makes sense with time shifting becoming one of the fastest growing new TV applications. “More importantly for pay-TV operators, is that studies have shown that greater use of time shifting content leads to a greater demand for paid for on-demand services,” he said.

“By mixing traditional TV and ‘Internet TV’ services and applications together, TV operators stand a better chance of keeping customers interested in their service offering. Ovum therefore expects to see a lot more of this type of partnership in the future,” Philpott said.

 
 
 
 
Apparently this week sees the 30th birthday of spam. Not the tinned meat product (which is 71 years’ old, if you’re interested), but the endless, unsolicited electronic messages with which we are each bombarded daily. The Informer wouldn’t have known about this anniversary were it not for a press release he was sent using the news as a hook to plug some anti-spam products.

There are layers of meaty irony here upon which we could feast, like a rich literary lasagne. But the Informer will simply observe that he can imagine no more appropriate way to be told about the birthday of spam than a press release such as this one. He should also point out that there is an unsubscribe link at the bottom of this newsletter.

Birthdays are usually celebrated of course, but to bake a cake for this would be a bit like throwing a party to mark the anniversary of the day you first learned you had herpes.

In equally un-celebratory mood this week was Alcatel-Lucent, which sat out the clamour of last week’s results-fest in order to have the stage all to itself on Wednesday for the mournful announcement of its fifth straight quarterly loss. Q1 this year saw a shortfall of EUR181m, compared to EUR8m for the same period in 2007. Sometimes things get worse before they improve. But sometimes, things just get worse. Nokia Siemens Networks is faring no better and proof of concept for the mergers that created the two companies is hard to find at the moment.

Revenues at AL were down a sliver at EUR3.86bn, and the firm projected more misery to come. Half of its sales are in US dollars, and customers are cutting back on their spending anyway.

Another problem is that the CDMA market in which Alcatel Lucent is the leader, is showing little sign of growth, according to CEO Pat Russo. There was speculation last October that Russo had been given a month to turn the Franco-US JV around, which clearly came to nought. But French press reports this week suggested that the firm was scouting around for a replacement again.

Nomura analyst, Richard Windsor, said: “There is still no sign of a consistent return to spending growth from operators, which leads us to believe that recovery to a sensible valuation is some way off.” Windsor also notes that the company offloaded what is believed to be its UMTS IPR portfolio during the quarter, and that this went to Research In Motion (RIM) for a profit of Eur31m.

Perhaps the firm will be hoping that the French Government goes ahead and issues a fourth 3G licence, as Alcatel historically didn’t do too badly in its home market (ahem). There were four licences originally in France, but there were only three takers prepared to stump up. The fourth licence was shelved because the only interested party, Iliad Telecoms, sheepishly admitted it couldn’t afford it last year. Its request for special treatment met with a haughty Gallic nose in the air.

But now French regulator ARCEP has been tasked with figuring out what to do with the frequencies that are gathering dust. French penetration is at a little over 90 per cent according to the Informer’s abacus wielding cohorts at Informa’s WCIS, and the market is often characterised as competitively stagnant. Western European Greenfield opportunities simply don’t exist, so if the French G decides to go ahead - and we won’t know until September - it could be interesting. After all, of the four major European players, Telefonica and Deutsche Telekom are absent from the market.

DT’s T-Mobile this week emerged as only the second operator to give public support to Nokia’s Ovi internet services initiative. Under a collaboration agreement, T-Mobile and Nokia will offer their European customers faster and easier access to all of T-Mobile’s web’n'walk internet services as well as all to Nokia’s Ovi internet services on a wide range of Nokia devices.

One of the core focuses of the partnership will be advancing the mobilisation of social networks, primarily through T-Mobile’s community-oriented MyFaves service, while widget cooperation is another development area for the companies.

The Finnish vendor said it would customise its devices to provide a dedicated suite of T-Mobile services which will be ’seamlessly’ integrated with Nokia’s devices. The T-Mobile exclusive Nokia 6650 device to be made available in July in Europe, will be the next step in this partnership.

Vodafone was the first operator to publicly throw its support behind Ovi, signing a deal with Nokia in November last year. The Vodafone deal is similar in scope to T-Mobile’s, involving the launch an integrated suite of Vodafone services combined with Nokia Ovi services on a range of Nokia handsets.

But Vodafone’s keeping its end up in the content and services space, this week unleashing an exclusive tie up with pop music’s primary exponent of looking good for her age, Madonna. Vodafone customers in 14 markets were given access to a one-off show from the singer, which was streamed live to the Vodafone Live portal. Meanwhile, Vodafone’s UK arm is now to bundle web access into its tariffs, instead of charging a stinking bloody fortune for it.

Elsewhere the World’s Largest Operator By Revenues has teamed up with the carrier that nicked its previous title The World’s Largest Operator By Subscriber Numbers (China Mobile) and Japanese player Softbank to establish a Joint Innovation Lab, to get busy on new mobile internet technologies, applications and services. It looks a little like a defensive play against internet players who have pointed their Chinos at the mobile industry and started walking.

Sticking with 3G in the UK for a moment longer, stroppy teenager O2 has realised the error of its ways and reacted in meek contrition to Ofcom’s threats over the carrier’s failure to get its 3G network coverage up to the requirements dictated by the licence. You may recall that in February UK regulator Ofcom saw fit to threaten O2 with a clipped licence term for its procrastination, which was a bit daft given that the punishment wouldn’t take effect for another 13 years. Nonetheless, O2 has pulled its finger out, and beat the new deadline by two months, running back to Ofcom for some fatherly approval.

Every now and again, as the Informer stares at the drizzle outside his window, he feels like buggering of to South America. So come with me, if you will, on a whistle stop wireless tour of the region. First to Brazil, where two interesting things caught the Informer’s eye this week. The first involved former footballing genius Ronaldo and a trio of none too convincing she-he private entertainers, and the second dealt with the prospect of consolidation in the nation’s telecoms sector. You can imagine which one the tabloids ran with.

Brazilian carrier Telemar Participacoes, which operates under the Oi brand, held a conference call on Monday to discuss the proposed acquisition of fixed line operator, Brasil Telecom. Telemar shareholders agreed to the deal last Friday, which would see the company pay out Reais5.9bn (EUR2.26bn) to acquire the parent of Brasil Telecom, accompanied by an offer to minority shareholders which would increase the total purchase price to about Reais12.4bn.

The move has stirred some controversy because it would be illegal under current regulations but it is known that the government is in favour of changing the law to allow for some consolidation in the market. In fact, new rules are expected to be introduced within the next couple of months.

Ovum analyst, Fernanda Mello Veiga, said: “This deal can only go ahead if the Brazilian president, Luis Inacio Lula da Silva, approves a decree authorising the merger. We believe that Brazilian president Lula may approve the decree because Oi would argue that a super national telco (majority-owned by Brazilian capital) would be able to compete on equal footing with Spanish conglomerate Telefonica and Mexican group Telmex/America Movil - the other telcos with significant power in Brazil.”

America Movil had some bad news in Equador, meanwhile. The regulator Conatel has rejected the carrier’s third offer to renew its mobile licence. The company, operating under the brand name Porta, will be offering mobile services until the end of August.

“Conatel’s head Jaime Guerrero said that Porta’s economic offer was not convenient for the state, but the offer value was not disclosed yet,” said Veiga. “We wonder how much Porta offered to pay for the renewal of its mobile licence. Non-official sources say that the total offer was around $307m. Ovum believes that the Ecuadorean government was expecting an offer around $550m, as Movistar just paid $220m for the renewal of its mobile licence in mid-April.”

Equally disappointed, probably, is Telecom Italia Mobile, which is about to lose its foothold in Bolivia. The country’s president Evo Morales gave TIM its marching (powder) orders this week with the announcement that he is going to privatise the carrier’s Entel operation. He claimed that TIM had not invested as much in the market as it had promised to, and that it owed the state some $25m in unpaid taxes.

And that’s about it for this week, where in the UK the May Day long weekend stretches in front of the Informer like a very short break. There are two traditional activities for this holiday. One involves carrying out ancient fertility rituals with bells on your knees and the other involves smashing up McDonalds franchises in protest at global capitalism. It’s a tough call to have to make.