iPhone in the UK: Apple faces stiff competition

When it arrives in the U.K. November 9, the iPhone will face stiffer competition in that market than it does in the U.S. That’s because prices for other smartphones are typically lower in Europe, where many operators subsidize the cost of new phones in order to attract customers.

Apple announced the November 9 ship date Tuesday at a press conference in London. The company also confirmed that O2 will serve as its partner in the U.K. and that the 8GB iPhone will sell for £269 ($538 in U.S. dollars).

Apple launched the iPhone in the U.S. on June 29, exclusively with operator AT&T. The 8GB model initially cost $599, though Apple cut the price to $399 earlier this month.

The European iPhone is substantially unchanged from the U.S. model, which already had the capability to operate on the 900MHz and 1800MHz GSM (Global System for Mobile Communications) bands used in Europe and Asia, in addition to the 850MHz and 1900MHz bands used in North America. Like the U.S. model, it has no 3G high-speed data capability, and will instead operate on O2's GPRS (General Packet Radio Service) and EDGE (Enhanced Data rates for GSM Evolution) networks.

In images posted on Apple’s Web site Friday, the company revealed a new version of the iPhone firmware, 1.1.1 with a new settings menu for international options not seen in previous versions. Such settings will be useful as Apple moves away from English-speaking countries.

Apple is widely expected to announce similar deals with operators in France and Germany over the coming weeks. France Télécom’s mobile-and-Internet subsidiary Orange and Deutsche Telekom’s subsidiary T-Mobile are the front-runners to sell the phone, according to research director Carolina Milanesi of Gartner.

Apple will need to enter new markets if it is to meet analysts’ sales expectations for the smartphone. The company said it sold its first million iPhones in just 74 days, but U.S. market researcher iSuppli said on Sept. 4 that it expected Apple to ship 4.5 million of the devices worldwide this year—and between 10 million and 15 million next year.

Although the iPhone was the fastest-selling smartphone in the U.S. in July, accounting for 1.8 percent of all handset sales there according to iSuppli, it will face stiffer competition in Europe where other brands of smartphone are more entrenched. Nokia said it sold over 10 million of its Nseries and Eseries smartphones during the quarter to June 30—including 1.5 million of its flagship N95.

Then, there’s the matter of price, where the £269 iPhone will cost more than rival handsets. For instance, O2 customers signing a £30-a-month contract for 18 months or more can get Nokia’s top-of-the-range N95 smartphone with Wi-Fi, camera, music player and GPS for free.

In the U.K., the iPhone will also face competition from Apple’s own iPod touch, which will be available there this month. In the U.S., the iPhone had a four-month head-start. The iPod Touch offers many of the same functions as the iPhone—with the obvious exception of telephony. In the U.K., the 8GBiPod touch costs £199 ($398) including tax, while the 16GB model costs £269 ($538). In the U.S., the same devices sell for $299 and $399, excluding tax.

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