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Operator Innovation: Fancy a MacBook Air, iPhone, iPad for £100/month?

It’s time for the third post in my Operator Innovation series here at Mobile Industry Review. This week I’m looking at lifestyle.

Before we get to that, here’s a brief word on this series. Generally speaking I will touch upon issues that I’ve briefly explored before here on the site — or that I’ve mentioned in passing. I’ve recently had some complaints from a number of operator executives that much of my strategic ramblings in this area aren’t easily accessible. Of course everything here on the site is freely available. The challenge is finding it. For example, one of the most popular operator posts I’ve ever written was this T-Mobile one back in December last year. Although the points made are brief, I’ve done a lot of advisory work off the back of each point! So whilst it’s easily accessible if you happen to be reading when I publish it, I recognise that later on, finding this content can be challenging. Hence this series.

If you caught my audio podcast walking around the park with the baby at the weekend, then you’ll have already got a precursor to this one.

Right then. Lifestyle.

In the United Kingdom, the mobile phone is now a leading status indicator. Our purchase decisions are heavily influenced now by what we can do with our phones and what people will think as a result. For many, an iPhone is simply a basic requirement. Indeed, amongst many communities, I perceive a severe issue with the iPhone 4: There’s nothing better. He’s got a 4. I’ve got a 4. She’s got a 4. But I’m better. Or, at least, I want to feel better. So why can’t I get a 4A. Or 4S.

It’s the same with cars. Heck, it’s the same with everything. Bags, sunglasses and so on.

And it’s not just iPhone, of course. HTC, Samsung, Nokia, they’re all at it, delivering multiple products for multiple market segments. Galaxy S? Or Galaxy SII? You’ll want the best, right? 😉

There aren’t that many companies that specialise in lifestyle as apposed to a product line. Apple does lifestyle. And this, we all know — at least, anyone who’s drunk just a few sips of theca koolaid (and forked out £24 for a plastic £0.05 converter) will acknowledge.

Years ago, my good friend Tom adopted Apple. Hook, line and sinker.

“It’s just fantastic,” he said, “I love it all, everything, it’s beautifully made, elegant, aesthetically pleasing and it’s made in california!”

[And if you’re reading on your 8-minute commute, Tom, am I paraphrasing, accurately?]

Tom started with a MacBook Pro. And before you know it, he was buying all sorts of gizmos. I remember ridiculing him for buying a £75 Mac iSight webcam — when the very best alternative was about £39. It did look good. He felt good. I felt good for him. I wondered if I was missing something. I carried on life and then a year or so later, I too made the switch.

Ding.

Lifestyle. Everything here at MIR is Mac. I do take quite a lot of pleasure from it all. Now detractors might think this is a little silly. However 76 billion dollars of free cash is not silly. Neither is the fact that I feel delighted with my Apple ‘lifestyle’.

Many of you will, I’m sure, be — in some small way — Apple converts. It might just be an iPad, perhaps an iPhone or maybe one of their laptops. The fact Apple has grown so fast and so huge means that if you’ve got an income over $100k, there’s a strong chance you count yourself an Apple fan by some measure.

Apple is now. They’re knocking it out the park in so many different ways. So they’re a good company to watch. They are, if you can work out the right deal, a phenomenal company to work with too.

As per my post earlier today, selling Apple products is ridiculously straightforward. I have generally been in the market for another iPad 2 for a few months. I just haven’t bothered doing anything about it. That was, until Vodafone happened to phone me out of the blue and offer me one on a deal that I considered to be pretty good. Actually I didn’t bother doing any calculations or research to determine this. It just felt right. So I bought it, there and then. I didn’t have to think. It’s Apple. Likewise, the chap from Vodafone only had to say the words “Apple” and “iPad” and we were both connected on the right plane of understanding.

This would not have happened if the chap had phoned up to sell me a Motorola XOOM. Nor would the guy — on his own reckoning — be reaching a rough success rate of 70%. (That is, out of 10 calls, 7 customers take the Apple iPad deal he’s offering — shockingly good!)

One other indicative Apple statistic comes to mind. I remember back when Vodafone was launching it’s very own ‘360’ social-cum-mobile-OS platform with dedicated handsets. There were reportedly 50 pre-orders for the VF360 Samsung M1/H1 handsets. Not long after 360 launched, Vodafone secured an iPhone distribution deal. This had 50,000 pre-orders. Fifty-thousand. If you assume a rough subscriber base of 18 million, half of which are contract, so, very roughly, 9 million customers — that’s 0.55% of Vodafone’s customer base.

(Note: These are estimates: I haven’t looked at the company’s recent subscriber figures. I was just aiming for an indicative figure.)

So Apple and mobile works, especially for the contract marketplace and especially for anyone with a bit of money.

So let’s get to the crux of my argument. If you’re going to sell me an iPhone, why not sell me an iPad? The chances are I’m probably going to be interested. Indeed, I represent a far more likely prospect.

We’ve actually seen this happening already from the enterprising chaps at Orange. The deal is utterly simple:

– 16GB iPhone 4
– 16GB iPad 2 3G+WiFi
– 600 minutes, unlimited texts, unlimited BT Openzone WiFi, 2GB shared data per month

Total cost?

£99 up-front and £65 per month, based on a 2-year contract. You’re shelling out £1,560 in total, but the iPhone and iPad are worth about 500-600 quid each, then you’ve got to factor in the cost of a price plan and line rental. When you work it out, it’s actually a rather accessible deal.

Interestingly, the deal is only available to existing customers. You’ll need to stump up another £50 if you’re new to Orange.

I’ve mentioned this offer to a lot of people and it’s raised a lot of ‘oh, really’ eyebrows. Unfortunately I don’t know how popular it’s been. I think I’m right in saying that I can name two people who’ve actually signed-up for it. So beyond anecdotal evidence, I don’t yet know if it’s winning a lot of attention. I shall aim to find out.

But let’s take it one step further.

Lifestyle, yes?

I don’t just use a mobile phone and a tablet. I also need a computer. This is the UK, after all. We’re still wedded to broadband and we most definitely still need to punch keys on physical keyboards.

So my lifestyle requires a ‘computer’ too. A laptop, let’s say. We here all the time that the iPad is nailing one category of laptops: Those £299 specials from PC World that seem to be just one step away from a Fisher Price model that I’ll shortly be buying for my baby son. Horribly plastic and not really that good. The iPad is perfect for sofa computing.

But yes, laptops are still needed.

So what can you do for me, Vodafone?

Let’s say I’m going to buy a MacBook Air. The entry level Air starts at a highly reasonable £849 (rising to £1,349 for the top, top spec).

This isn’t a world away from the top of the range 64GB iPad sold by Vodafone at £645.

So what would it take for you to sell me a MacBook Air, Vodafone? £849 across 24-months is a fairly reasonable £35.38. But I’d assume you could get a decent bit of a margin from Apple to make it worthwhile.

At £35 per month, I’d buy. Definitely.

So sell me an iPhone. Check.

Sell me an iPad. Check.

Sell me a MacBook Air. Check.

All price plan/access fees included. Check.

My rough maths put the monthly cost for this package at £100.

For some, the transparency of this would be too much, despite the fact that (as Dan Lane points out on Twitter), many probably do this anyway using credit cards.

For others, though, the point-and-click convenience of all three devices will be too good to refuse. Especially if you’ve been admiring those nice MacBook Airs you often see proudly displayed in Starbucks.

Would you go for something like this?

Here’s some immediate feedback from Twitter:

SimonLR: @Ew4n I downright despise both Apple gear and contracts and I’d say that’s a hell of a deal.

DhruvBhutani: @SimonLR @Ew4n Ditto ! Hate Apple gear but that deal is as good as they come IMO

PatrickJPR: @Ew4n I think that’s a pretty good deal, esp for a small business .. if I’d been offered it I might well have signed up for that 18 months ago. I still might to equip a team member

Jok5r: @Ew4n I’d do it but only if there was a contract with a certain amount of free minutes/texts, tethering and unlimited downloads.

djnermal: @Ew4n think thats a fair deal. Although it could mean more vikki pollards owning high end kit to snort coke on top of

[Note, do read my ‘Vicky Pollar has an iPhone 4; You are not cool anymore post’ – djnermal has a point!]

Now then, why wouldn’t an operator consider this strategy?

Let’s look at this comment posted on my audio podcast discussing the issues:

Reader Stefan Constantinescu writes: What you’re asking for is a radical transformation of well established business models. Whereas before an operator subsidized a device over the length of your contract, note: a device you’d use with their network, and a bank gave you a small loan to do things like pay for school or renovate your kitchen, you want your operator to act like a small loans provider. In doing so, they risk being classified as a financial institution. This may or may not be a bad thing, especially considering the upcoming “mobile payments revolution”, which can best be described as a bar fight between operators, traditional debit and credit card issuers, banks, consumer electronics companies, and alternative payment providers such as PayPal or MoneyBrookers.

The question here is why would someone want to go with an operator for a small loan when they can instead just put it on their Visa card? If the operator offers better interest rates, then they become the more attractive option, but … it’s messy.

Your point is well made Stefan.

I am asking for radical transformation.

Sell me a MacBook Air, Mr Operator, and you’re relevant to me. Because I can’t subsidise that easily. I have to think about it. I need to put it on a credit card. It’s a proper purchase for me.

Use your financial muscle and help me out. Recognise that for a segment of your already nicely performing customer base, you’re going to dramatically increase revenue and ensure phenomenal lock-in.

Can you imagine how people would react to receiving an Air with their iPhone and iPad? The lock-in would be tremendous. You wouldn’t ever look at another operator. You’d need to deploy some smart upgrade options, especially as Apple will obviously deliver new devices during the 24-month contract. But you could offer a swap — and recycle/resell my equipment.

The interesting thing is that you can charge the hell out of me. Because it’s Apple.

That’s right.

I want the Apple kit.

I couldn’t give a toss over some OEM equipment or a plastic Dell laptop.

But Apple, I want it. And I’m already preconditioned to PAY for the privilege.

Want to get your iPad repaired at the Apple store? You can’t. Simple. You *can’t*. Provided you’re in warranty, you can pay a few hundred quid for a replacement. Oh, Apple will repair the iPad and then resell it for money, but you’ll need to stump up that fee, whether you completely nailed the iPad or just cracked the screen.

And we just do it.

So I could imagine a one-time ‘upgrade’ fee of £199 or £249 that would get me a complete refresh after 12-months (with another 24-month extension, thereby guaranteeing my revenue). Something like that.

People are funny when it comes to Apple.

Why not jump on that?

Why not get into some transformational excitement?

You, Mr Operator, already have a logistics network second-to-none. Vodafone could, over night, become the largest retailer of Apple equipment in the United Kingdom. All of a sudden, the company would now have some relevance to Apple beyond the usual bit pipe conversation.

How about putting a genius bar in every one of the hundreds of Vodafone shops across the country?

How about a small business deal? £199 a month and instead of an Air, you get a MacBook Pro?

Or a movie-maker package? £249 a month and you get both a MacBook Air and a Mac Pro tower?

Now you’re helping me. Now you’re relevant to me. Now you’re recognising that yes, you’re a bit pipe. But a valued one. I nee the connectivity, but alone, that’s not very exciting and you’ve next to zero market differentiation.

This kind of offering would certainly differentiate you. Move further though. If I sign-up for the £100/month package, guarantee me 5-minute replacement on all hardware. Charge me extra for this if necessary. But if my iPhone screws up, or if I have a problem with my Air, let me walk to your nearest store and swap it. Job done. Move on. No questions asked. Now your value is skyrocketing in my eyes.

Don’t just sell me airtime. I can get that anywhere — and increasingly, that’s what folk are doing.

Would Apple allow this strategy? Who knows. Could you duplicate it with Dell or Sony? (for the non-Apple fans) Of course. Would the operator CFO wear it? I wonder. How would the markets react? As long as you’re demonstrating sustained, reliable and renewable revenue streams, one would imagine they’re react positively.

Right then. This post is most certainly a contentious contribution to the series. As Stefan pointed out, it places operators quit far outside of their default comfort zone.

Let’s be clear though: Where the operators are now, that’s not at all comfortable.

What do you think? I promise that next time, I’ll stay within the traditional ‘innovation’ sector!

– – –

Check out the other posts in the Operator Innovation series:

Why can’t my operator talk to my bank when my card declines abroad
Taxis, baby, Taxis!

Update: Thanks to reader Rarebit who points out that 50k into 9 million is actually 0.55%. And not 5% as I originally published!

By Ewan

Ewan is Founder and Editor of Mobile Industry Review. He writes about a wide variety of industry issues and is usually active on Twitter most days. You can read more about him or reach him with these details.

16 replies on “Operator Innovation: Fancy a MacBook Air, iPhone, iPad for £100/month?”

re: the finance / laptop thing… I don’t think it’s such a massive leap… Many operators already offer laptops with 3G connections financed over 18 or 24 months (in the UK at least). A USB modem and a few gig a month are peanuts relative to the cost of the laptop.

However… I know at least one operator who was reducing the cost of their laptop offerings due to issues with fraud so perhaps that is a test they do want to phase out…

I had the opportunity to watch a consumer panel (the ones where you sit behind a mirror watching a small group talking about products) on the iPad, and one thing was perfectly clear: no amount of deal will make a second contract attractive. Mobile contracts are mostly seen as a necessary evil and no iPad will justify a new one, unless the financials of the deal make the provision of wireless service basically free.
Consumers in the panel were much more open to the idea of bundling it to broadband, however, since its an existing contractual relationship and the value of the free Wi-Fi router now pretty much close to zero.
This obviously can be classified as anecdotal evidence at best (I’ve only seen two hours worth of panels), but I think before operators launch those deals, they need to work hard on improving their perception amongst the general public. Because right now, its either a deal for the power users (who could probably get a better deal on SIM only), or a rip-off aimed at squeezing more monthly money out of people with limited immediate liquidity (e.g. the “free Playstation” mobile deals).
And the bottom line remains: you sign a contract for the provision of a service (be it broadband or mobile), if you get a freebie: fine. But the accessory itself will hardly ever justify signing another contract, especially in a time where mobile hotspot features are pretty much in every smartphone.

Alternatively, this option is also available to Apple. They already offer financing over 36 months (‘We are able to bundle together your complete requirements for hardware, software, accessories and after-sales service into affordable monthly payments.’), although it isn’t heavily promoted. You can also get AppleCare (‘Direct access to Apple experts, Mail-in or carry-in repairs, Express replacement service’).
With Apple’s end-goal being a carrier-neutral data-centric device, and financing and AppleCare, it would just take a few tweaks to deliver your idea. However, I still think this may feel like more of a commitment to the average consumer. “Financing” is a scary word, whereas “we’ll just raise your monthly tariff a bit” doesn’t have so much friction.

That was tried already, hasn’t it? Completely agree with the Apple vs anyone else argument but I seem to remember Vodafone offering in the past a really nice HP netbook with built-in 3G card. Would be interesting to know how much that sold…

Did I read that correctly – Apple do not honor their warranty for the ipad? A legal obligation to the consumer that they legally, in all of the EU, can’t avoid with a standard contract? You have to pay to get your ipad fixed (via a replacement)?
And you still buy from them? CoolAid, indeed.

Did I read that right: Apple do not honor the warranty for the ipad? Asking people to shell out for a replacement unit when they are under a legal obligation to repair the customer’s unit amounts to that. And, in the EU at least, there’s no way they got out of providing a warranty to the consumer.
If this is the case, then it’s about CoolAid indeed that people continue to buy from them.

Did I read that right: Apple do not honor the warranty for the ipad? Asking people to shell out for a replacement unit when they are under a legal obligation to repair the customer’s unit amounts to that. And, in the EU at least, there’s no way they got out of providing a warranty to the consumer.
If this is the case, then it’s about CoolAid indeed that people continue to buy from them.

Pedro — how do you react to the point I made about pitching a Dell laptop vs an Apple laptop? I think the consumer would react completely differently — and positively.

Alexander, if the device itself is faulty, I’m sure Apple will replace it. However if you break it, then it’s a single replacement fee.

Ewan, you are so right to single Apple as the “magical” brand, however I am not sure that marrying Apple to the operators is a match made in heaven.

Vodafone use Unipart for their logistics which generally takes care of things like return and repair as well.Incidentally, I believe Apple uses them to.I think there would have to be significant investment from Vodafone to become a proper Apple re-seller in terms of paying Unipart to scale, re-orging VF’s own retail estate, training, after-sales care etc.
Do I think VF could match the quality of user-experience in an Apple store? Er, no.
Would such a move conflict with VF’s overall “super mobile” strategy? Yes, probably.

However, I do think Apple’s greatest problem is actually keeping up with demand – including the actual products, the distribution, support, etc.
I suppose partnering with big operators could be one way of addressing the distribution problem but surely guys like Tesco, Asda & Best Buy are equally, or even better, equipped to to do this and won’t be trying to sell irrelevant airtime services with the Apple kit.

These guys already sell Apple kit, it’s a small step to getting them selling MORE Apple kit within an Apple Section of their stores.

Najeeb — talk to me about Vodafone’s ‘super mobile’ strategy as I don’t think it’s been doing them that much good of late?

Broadly speaking it’s about:
Best network – eg coverage, speed, etc
Smart network – clever caching, seamless wifi handover, etc
Unrivalled Customer Experience – get treated the same by online or retail, use CRM system info to optimise offer for customer, etc

Being a major re-seller of Apple kit could dilute or conflict with the above.

Just for the sake of it on a Friday…

re: lifestyle… it’s becoming a bit of problem to walk around with your iPhone, or whatever, in many parts of London. So many muggings. People are choosing not to upgrade or look too flash even if they can afford it.

Also, having the latest phone or Apple gadget is becoming like an anti-status symbol for trendies. 

Also, aren’t we more or less at a point where the actual difference with each new handset that comes out is less and less noticeable. We’ve had a hell of few years, but phones all seem about the same now, no? Incrementally better, but not £500 worth of better.

If you have £500 why not put it to your kids’ university fund or maths tuition, or piano lessons? Your old iPhone can still get mail, surf the web. That’ll do most people.

Alas Najeeb, that’s a pipe dream. Almost as big a pipe dream as the MacBook Air example in this post. The best these operators seem to be able to do is deliver business-as-usual with a different marketing campaign each quarter.

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