Budget phones vs iPhone

Apple’s rumored less-pricey iPhone has been envisioned over and over again in some damn good renderings. The rumor mills have been churning out their fair share of whispers on a regular basis and both the Wall Street Journal and Bloomberg have thrown their credibility behind the meme. But despite all this crazy talk and tremendous speculation, Apple is seemingly unimpressed as the company’s marketing honcho kinda shot down the rumor, recently telling the press his company isn’t one to blindly pursue market share.

Be that as it may, analysts warn there’s only that much room to grow in the saturated high-end smartphone market. Therefore, conventional wisdom has it, Apple’s going to need a more affordable device sooner than later. This has now become a sentiment shared by one wireless carrier CEO who cautions of changing consumer behavior as a lot of folks are now unwilling to pay north of $600 for an unlocked smartphone…

Journalists Scott Moritz and Marie Mawad of Bloomberg Businessweek interviewed France Telecom CEO Stephane Richard, who said that “we are in a period of changing consumer behavior,” remarking there are fewer shoppers in search of the latest and greatest gadget, and more of them are seeking lower prices on wireless service.

There are fewer early adopters, and probably with the next release of the iPhone this will be evident. Selling a phone for $600 is getting more and more difficult.

And he should know: France Telecom has seen prices drop 25 percent over the past three years, squeezing profit margins and its stock price. Worse, consumers in France and elsewhere are growing increasingly reluctant to fork north of $600 for an unsubsidized iPhone.

Customers are more focused on price. Except for a few hundred thousand people who will buy the latest iPhone – except for that category of people – the majority of the market will be difficult.

By the way, France Telecom execs are prone to leaking confidential information.

Last May, ahead of the September 2012 iPhone 5 introduction, one company exec said a smaller and thinner iPhone with a tiny SIM card design was coming, even predicting the launch date later.

iPhone 5 presser (Phil Schiller, iPhone family prices)

Notably, the CEO of France Telecom recently said that “Apple has become more flexible” and “probably a little less arrogant than they used to be,” a change he attributed to a growing competition.

“I think they are probably a little more under pressure, and it is quite nice,” he said.

Steve Jobs hated carriers, by the way.

As for the budget iPhone meme, Apple’s least expensive unsubsidized device is a $450 no-contract iPhone 4, which costs $450 in the United States. However, due to high import taxes and higher cost of doing business overseas, the figure balloons twofold, even more, in emerging markets like India, China, Russia and Brazil.

And because these countries’ gross domestic product and consumer buying power doesn’t compare to that in the United States, Apple’s smartphone is out of reach for most shoppers, resulting in a single-digit market share in these countries.

Budget iPhone (Nickolay Lamm and Matteo Gianni teaser)
A less-pricey iPhone with a polycarbonate body akin to the G3 iMac,
courtesy of 3D artists Nickolay Lamm and Matteo Gianni.

Another factor: emerging markets are increasingly fueling growth because that’s where your feature phone owners mostly live. These people are looking to upgrade to smartphone (the remaining 50 percent of the market) and many of them are looking for fair deals that won’t break the bank.

Also important, cell phones outside the United States are typically sold unsubsidized and separate of the wireless service so shoppers typically balk at putting down $300+ in order to walk out of the store with a brand new cell phone in their pocket that doesn’t come with a long-term mobile service contractual obligation.

Budget iPhone (Martin Hajek 001)
Budget iPhone rendering via Martin Hajek.

T-Mobile has become the first major U.S. telco to offer installment payment in response to the changing market realities. The company will ease the pain of buying one by requiring you to pay $99 upfront for an entry-level iPhone 5, with an additional $20 paid each month over the next 24 months.

With web commenters welcoming the move and competition watching closely how the situation unfolds, T-Mobile’s “Un-carrier” initiative will be put to the real test when the iPhone 5 officially launches on its network next Friday, April 12.