iPhone makes global loss, says report
While Orange and T-Mobile compete with O2 to sell the iPhone in Britain, a report by Denmark's Strand Consult reveals how it makes a loss for providers and struggles against other phones — Apple's iPhone is not the profit generating must …
Context & Ripple Effects
The Strand Consult report lands two years into the iPhone's European life, when the deal structure Apple set up in 2007 still looked like a coup: Vodafone walked away rather than hand Apple a big slice of iPhone revenues, while O2 embraced Apple's revenue-sharing terms and took the UK exclusively. By early 2008 that bet was already fraying — UK sales had disappointed and sellers braced for a hit as cheaper handsets crowded the market.
First-order effects
- Orange and T-Mobile are competing to join O2 in selling the iPhone in Britain even though Strand Consult's arithmetic says each unit sold deepens the carrier's loss — the prize is churned subscribers and contract value, not handset margin.
- O2's exclusive-UK position effectively ends, forcing it to defend share it paid a premium to secure.
Second-order effects
- Rival networks will bid up subsidies and marketing spend for the right to sell the iPhone, transferring more of the device's economics from carriers to Apple and validating the leverage that pushed Vodafone out in 2007.
- Handset makers watching the model can price their own flagships against the same carrier-subsidy pool, squeezing network margins across the smartphone tier.
Third-order effects
- If exclusivity keeps costing operators money while still being contested, European carriers drift from revenue-sharing partners toward interchangeable distribution channels — with the bargaining power settling permanently with the device maker.
- The pattern points toward regulation and industry scrutiny of how handset subsidies are booked and disclosed, since reported 'losses' depend entirely on which side of the P&L the revenue share sits.
The trend: Smartphone exclusivity is shifting value from network operators to device makers, as carriers pay escalating subsidies for handsets that lose money per unit but anchor their contract books.