Global Insight Perspective | |
Significance | France Telecom's Orange will continue to sell the iPhone but it will have to do so in competition with its rivals SFR and Bouygues, who have a golden opportunity to start shipping in time for Christmas and the seasonal sales. |
Implications | France Telecom has announced it will appeal and this further regulatory blow will leave it feeling somewhat victimised as the government seems to be targeting the former incumbent as it seeks to open up the French market. |
Outlook | It is unlikely the ruling will break the bank for Orange. Despite the cultural iconography of Apple's iPhone, the recent slew of touchscreen launches means the handset holds little of the "must-have" status it commanded a year ago. |
The French competition regulator has suspended France Telecom's rights to exclusively sell the iPhone in France, opening up the handset to other operators. The Competition Council said the decision will take effect immediately, giving rivals to France Telecom's Orange the chance to get the Apple handset on the market before Christmas. The council said in a statement it believed that Orange's five-year exclusive deal with Apple was "clearly excessive" and risked "serious and immediate damage to competition on the mobile market and to consumers". The regulator has threatened to fine Apple and France Telecom if they defied the ruling, saying that any future exclusivity deals for models of the iPhone would be capped at three months. France Telecom has announced it will appeal against the decision.
Outlook and Implications
- A "Serious" Blow to Orange: France Telecom's Orange says it has sold approximately 450,000 3G iPhones in the last year. The company signed an exclusive deal for the sale and distribution of the iPhone in September 2007, following similar deals with O2 in the United Kingdom and T-Mobile in Germany, and Orange began rolling out the handsets in France at the end of November 2007 (see France: 29 November 2007: iPhone Debuts in France). France Telecom has now stated the ruling is "serious" and "put the market economy into question", and the former incumbent says it intends to appeal against the decision, which it says "places France in a radically different position" than Britain, Germany, and Spain. However, a council official has told Reuters that any appeal against its decision would likely take at least a year to complete—and with the regulator stating the ruling will be enforced from today, France Telecom faces losing its exclusive rights to the iPhone—meaning it will have to compete with its competitors in the market for the handset.
- A Victory for the Rivals: The source of the Competition Council's ruling is believed to be a complaint from rival Bouygues Telecom over the exclusive deal, which has been upheld as damaging to competition in the French market. Third-placed operator Bouygues has already said it hoped to start selling the iPhone as soon as possible, and a spokesman for the second-biggest player, SFR, said it hoped to start selling iPhones today, stating: "We are going to contact Apple to set up a distribution contract." Although Orange will be able to continue to sell the iPhone, it will have to do so in competition with its rivals, who now have a golden opportunity to start shipping the handset in time for Christmas, and the seasonal sales.
- Regulation in France Strikes Another Blow: France's telecoms regulator Arcep has shown that it is serious about opening up the mobile market to fresh competition, with significant cuts to termination rates recently announced (see France: 4 December 2008: French Regulator Arcep Confirms Termination Rates Cut from July), and a consultation into 3G network sharing underway (see France: 10 December 2008: French Regulator Arcep Launches Consultation on 3G Network Sharing). A tender for the country's fourth 3G licence is expected imminently (see France: 23 September 2008: France to Launch New 3G Licence Tender), and the government has already hit the operators where it hurts this year with a new telecoms tax (see France: 9 July 2008: France Telecom CEO Warns on New French Telecoms Tax). On top of domestic regulation, the operators also face wide-ranging changes to telecoms regulations in the EU (see Europe: 28 November 2008: EU Governments Reach Deal on Telecoms Measures, Back Rates Cuts) while France Telecom is currently keeping an even keel in the face of the global economic downturn (see France: 30 October 2008: France Telecom Weathers the Storm with Flat Q3). However, this further regulatory blow will leave the former incumbent feeling somewhat victimised, as the government seems to be targeting the company as it seeks to open up the French market.
- Is the iPhone Still a 'Must-Have' Handset? A slew of new high-end handsets has recently hit the market, including Nokia's 5800 (see World: 3 October 2008: Nokia Takes On the iPhone with Touchscreen Handset), HTC and Google's G1 (see World: 24 September 2008: T-Mobile and HTC Launch First Google Android Phone) and RIM's BlackBerry Storm (see World: 8 October 2008: RIM Cooks Up a Stormwith New Touch-Screen BlackBerry), meaning Apple now has direct competitors in the touchscreen market, many of which offer features which are equal to or better than anything the iPhone can offer. Despite the cultural iconography of Apple's iPhone, it is unlikely that the loss of the exclusive deal will break the bank for Orange. The vast majority of Apple's diehard "fanboys" will already own the device, and while the handset is attractive to new customers, it holds little of the "must-have" status it commanded a year ago.