AT&T Launches Much Rumored, Long Awaited iPhone3G at Much Lower Price Point

| Jun 11, 2008 | U.S. Wireless | Competitive Intelligence Repprt

| Analysts: Bill Ho, Kitty Weldon

Current Perspective: Positive
Vendor Importance: High
Market Impact: High

Event Summary

June 9, 2008 – AT&T announced that it will offer the Apple iPhone3G beginning July 11. The new attractive $199 pricing for the 8GB version and $299 for the 16 GB version are only available at AT&T and Apple retail stores with a two-year voice-data contract. The consumer data plan has also changed to $30 per month from $20 while an enterprise plan remains at $45 per month.

Analytical Summary

• Current Perspective: Positive on AT&T’s introduction of the lower-priced iPhone3G because the new subsidized business model, which allows the carrier to offer it for only $199 and $299, should significantly drive adoption. It will be hard for many consumers or individual-liable prosumers to resist a faster iPhone at that price, especially with the promise of new SDK-powered applications on the horizon. Similarly the new price, in conjunction with push email and device management, will appeal to corporate customers.

• Vendor Importance: High to AT&T, not only because the exclusive (on a temporary basis) launch of a faster, cheaper iPhone is likely to succeed in the market, but also because changing to a traditional carrier business model by which AT&T lowers the price provides the carrier with a predictable way to quantify the cost to acquire an iPhone customer and the customer’s contribution to revenue. Also, AT&T makes up the difference over the two-year contract period due to the $10 premium ($20 to $30) on the consumer data plan and because they are likely to enjoy higher sales volumes.

• Market Impact: High on the enterprise mobility segment because the long-anticipated iPhone3G is priced to move at $199 for an 8GB version and $299 for the 16GB model. While the initial iPhone was priced for the early adopter and affluent consumer/prosumer market, the new price point is at a more palatable level and is similar to industry smartphone price tags. It also features enterprise features including push email and device management, very important for the large business customer.

Recommended Competitor Actions

• Verizon Wireless and Sprint should point out that regardless of the $30 iPhone data plan, streaming video may be achieved with a less expensive plan. Both Verizon Wireless (V Pak) and Sprint (Power Vision) offer streaming video and web access for $15 a month. This is half the price of the new iPhone plan. Moreover, Sprint can say that within their data plan, unlimited picture messaging is also included.

• Rival carriers need to bring more viable iPhone responses to the market. While LG Voyager and the Samsung Instinct are aimed squarely at the iPhone, the iPhone’s user interface still captures the consumer imagination and that of the press. It is still the gold standard to meet or beat.

• RIM and Microsoft (and the latter’s OEM partners) can say that the management and security platforms from Apple are less feature-rich than their own BES and MDM server options, and RIM will note that iPhone email will not sync up Domino and Novell users. If iPhone is compatible with MDM (or Afaria) then Microsoft (and Sybase) should state this explicitly.

• T-Mobile needs the new HTC Android-powered device that it will launch this summer to have an equal to iPhone user experience. From initial Android applications demonstrations, the interfaces and touch manipulation pay homage to iPhone’s usability trailblazing. Let’s hope that this device and upcoming devices are similar and yet different enough that Apple’s vaunted interface does not remain a differentiator.

Recommended End-User/Customer Actions

• Existing customers should look into upgrade possibilities. Though the iPhone will be just one year old. AT&T will allow these users to purchase the iPhone3G at new customer (subsidized) pricing. This is a departure from the normal upgrade cycle typically available at the 18 or 24 month mark. All iPhone customers should know that a two-year contract reset is a necessity in addition to a higher-priced data plan.

• Current iPhone customers who do not plan on upgrading to the iPhone3G should be looking to upgrade to the new iPhone 2.0 software available by the July 11th launch.

• Business customers need to thoroughly understand the relative benefits of the new email sync and device management and security capabilities of the iPhone before making a commitment to the platform as a corporate-liable arrangement.

CLIENTS ONLY

Current Perspective

Competitive Positives and Concerns

Recommended Vendor Actions

| Client access - Wireless Services - U.S. | More information
| Client access - Enterprise Mobility - U.S. | More information

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