France Telecom CEO: gold rush is over, budget iPhone is inevitable

By , Apr 4, 2013

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.

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  • http://twitter.com/klouud Timothy Polumbo

    These may not even be available in the US. I can definitely see a need in other markets tho. Either way… why would you not spend the extra money and get a phone that is going to last you ~2 years? The budget ones are going to almost immediately be obsolete.

    too bad there arent aftermarket iPhone parts — like Mac stuff — you just get the base model + upgrade the processor and then hop on over to your favorite upgrade website (mine is OWC) and max out your RAM, grab a 3-4TB 7200RPM HDD, and a Super 6G Pro SSD and leave everyone else in the dust for less money than the Apple upgrades.

    tim

    • http://twitter.com/MLGJeanmarc JeanMarc

      They will be outdated and obsolete in 5 months

  • http://twitter.com/MLGJeanmarc JeanMarc

    In my opinion, I really don’t see a budget iPhone. Everybody that owns apple devices likes to stay up to date on their apple gadgets. People don’t like old iPhones because they feel outdated. But again this is just my opinion.

    • http://www.facebook.com/tafk1 Taf Khan

      Same here, it’s got to be the flagship model each time.

      • http://twitter.com/MLGJeanmarc JeanMarc

        Everyone wants to be up to date all the time.

      • http://twitter.com/maxhax max

        The Budget phone is to replace the 4 and 4S. Same as 4S but cheaper to make, more profit for Apple. Lots of people purchase the 4S still, It’s just coming to eliminate the 4 and 4s

    • @dongiuj

      I see your opinion but then again people said the same thing about the iPad mini ( non retina, no good ) and look how well that sold.

  • http://twitter.com/Lagax_ Lagax

    It’s so funny: every year there are new Rumors about a less-pricy iPhone, and the press people are so dumb and believe this… But there are SOME clever people not thinking this. You know, Tim Cook and Steve Jobs both said that there WILL NEVER be a less pricy iPhone, but NO! Again people are to dumb to get it, but I see it, these ‘analysts’ are the dumbest people ever and earn their money without doing anything just writeing the same s*** every year, the sad thing is that it works, so I think it’s a job to think about? :D

    • http://twitter.com/MLGJeanmarc JeanMarc

      Plus people keep believing the same crap every year. You sir made a great point.

    • http://twitter.com/klouud Timothy Polumbo

      Didn’t Jobs say Apple would never make a smaller iPad?

      • http://twitter.com/Lagax_ Lagax

        He Said they are not planning to and it is plausible that they weren’t really at the time he said that.

  • http://www.facebook.com/tafk1 Taf Khan

    I don’t ever see myself buying a budget iPhone. It’s the premium, flagship model that I will continue to purchase.

  • Guest

    I was on t-mobile this week just to get a feel for it and I NEVER got signal(Kentucky). Then try to up the price by selling unlimited 3G data instead of edge when they know my iPhone can not pick up 3G on their network. But what made me mad the most was once I got the number I got telemarketers and scammers calling me 24/7(no joke). What do they do give your number out on a scammer website?

    • http://www.facebook.com/mmcnier Matt McNier

      It’s number recycling. The previous subscriber was probably giving out their number & not on a single no-call list. In today’s age, there are no new, shiny phone numbers. Only recycled ones. The best way for you to test the true strength of the TMO service is to try out the 3G. I have a 3Gs on TMO & I get 3g in many (not all) places all over Colorado Springs. Eventually, all towers will support 3g for iPhones.

  • pauleebe

    Different markets have very different consumer tastes. If Apple wants to remain relevant and continue expanding globally, they will have to cater to each market. This might mean release cheaper non contract phones to permeate these markets, as other manufacturers have … or they can keep their strategy the same but this could limit growth/stock price.

  • http://twitter.com/erny_c Erny Carrillo

    Apple was created about QUALITY. Not QUANTITY. So for apple to make a budget phone so every idiot out there can buy one, is just plain stupid.
    Thats why android exist… For idiots thats want a smart phone but cant pay high bucks for.

    • http://www.facebook.com/saeed.ghattas.5 Saeed Ghattas

      Golden words.

    • http://twitter.com/erny_c Erny Carrillo

      The ppl that dislike my comment is b/c their android fans!

      All about quality, not quantity. (Except for android)

    • http://twitter.com/ivanivanovsky Ivan Ivanovitch

      wouldn’t call them idiots, but the rest seems true. they’re just people who aren’t that much into technology.

    • @dongiuj

      Comments like that make YOU sound like the “idiot”.
      That’s like saying only idiots buy iPhones because they don’t know how to operate anything more technical.
      Bet you don’t like that comment, do you.

      • http://twitter.com/erny_c Erny Carrillo

        Im guessing ur an android fan

      • @dongiuj

        Guess again, “idiot”.

  • http://twitter.com/ExcaliburEdge ExcaliburEdge

    The budget iphone in 2013-14 will be the iPhone 3GS.

  • s0me

    I’m from Romania, i bought my 4s 16GB from a Romanian retail store contract free for like 750-800 USD (converted currency) 11 months ago. Today the price is still the same and the Iphone 5 16GB is 1000USD contract free. Of course the majority of people in my country have android devices, they are cheaper. So YES Apple needs a budget iphone to attract more customers that have a limited budget / dont want to spend that much on a phone. People that like and have the posibility to buy the high-end phone will buy it.

  • http://www.facebook.com/mark.flanighan1 Mark Flanighan

    There are now comparible phones to the iphone especially as it is less about the phone and more about things like camera technology