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Apple Sales Targets May Hit Roadblock After Slow IPhone Launch in 21 New Markets

A generally fragmented market, limited availability slowing economies, a lack of wide-scale 3G infrastructure and pricey service plans that an average consumer can’t afford may be a first indication that there are problems Apple will have to solve, if the company wants to meet its recently adjusted shipment goals. The good news is that Apple is said to have expected slow launches and the company should have no problems selling 10 million units by the end of the year. However, there are analysts who now believe that the 45 million unit target for 2009 may be overly optimistic.

The second wave of the iPhone 3G rollout brought the device to Argentina, Chile, Colombia, Checz Republic, Ecuador, El Salvador, Estonia, Guatemala, Honduras, Hungary, India, Latvia, Lithuania, Paraguay, Peru, Philippines, Poland, Romania, Singapore, Slovakia and Uruguay, bringing the bottom line to 42 countries in which the device is now available. It was expected that most of these countries will not hit the rate of success the phone has seen in the first-wave countries, but analysts have noted that Apple will need to successfully expand into 70 countries by the end of the year to reach set goals and secure the device’s mid-term future and growth path.

Piper Jaffray analyst Gene Munster estimated that the addition of 21 new markets now increases the addressable iPhone market to 660 million subscribers, up from 370.5 million when the iPhone 3G rolled into its most promising markets on July 11. However, Apple can currently sell the iPhone only to a small portion of addressable customer base, due to its lofty price tag: Munster came up with 660 million by adding up number of subscribers that each iPhone carrier has in all markets where the handset is sold. The top five countries that contributed to the 660 million number are India (105.2 million), Colombia (34 million), Poland (26.9 million), Argentina (25.5 million) and Peru (15.1 million).

There are no launch weekend sales figures, but there are clues that point to a slow start. On one side we noticed that Net Applications web usage data shows a sharp rise of iPhone’s share of the browsing market since Friday: The iPhone hit a browser market share of 0.48 percent on Saturday, up from 0.29 percent on Thursday. On the other side, there were no people standing in line for the device and the general excitement was subdued. Some blame this scenario on fragmented markets with vast cultural differences, weak economies, low consumer buying power, and pricey service plans (especially 3G data): In fact, in many of the new iPhone countries, the device is well beyond the reach of most middle-class workers.

Read on the next page: Phony lines in Poland, skyhigh prices in India

Telekomunikacja Polska (TP), a carrier controlled by France Telecom and Deutsche Telekom-owned Era launched the iPhone 3G in Poland Thursday evening. TP shocked local media when it acknowledged that it hired people to form "fake" lines in 20 of its retail stores in order to "drum up the interest in the iPhone." These people even tried to sell their slot to others for up to 300 zlotys (about $135). "The aim was to attract attention. The people in the queues told passers-by about the iPhone," spokesman Wojciech Jabczynski told Agence France-Presse (AFP). "It was a marketing move. We thought it was a pretty interesting strategy."

With a population of 1.13 billion people, 260 million cellphone subscribers and its rising upper class willing to spend, India has turned into one of the world’s fastest-growing mobile phone market. Bharti Airtel and Vodafone Essar carry iPhone 3G in India, reaching 105.2 million subscribers. But the two carriers don’t have a 3G network in place and they priced the 8 GB model and the bundled service at 31,000 rupies - $712. Three iPhone 3Gs will almost buy you a brand new car - the $2300 Tata Nano - in India.

India’s Economic Times said that "hefty price tag keeps queues away." Airtel’s president defended his company with claims that Apple is to blame for setting the handset price steep, not the carrier. According to the executive, 200,000 iPhones have been pre-ordered, but it seems that only the upper class is interested enough to sign a contract. It was estimated that 30,000 unlocked original iPhones were running on Bharti’s network prior to the arrival of the iPhone 3G.

Apple is already planning to roll-out the iPhone in 28 more countries in October. These markets are mostly under-developed nations with even weaker economies and a smaller addressable subscriber base (excluding Russia and China, which are the two key targets for the third wave.) This final expansion will introduce more unknowns to the iPhone equation and analysts will then have the complete picture top determine whether the iPhone is as successful as Apple claims.

Most analysts warn that Apple needs all 70 countries, not just US, to meet its self-imposed 10 million units target by the end of this year. Ten million is a minimum user base to keep the iPhone afloat and enable Apple to move to 45 million units planned for 2009. A slow start in 21 new countries may not have hurt Apple’s ability to meet its target, but it may have affected the 2009 goal. Some analysts are now saying that Apple should reconsider the 45 million target for 2009 because of the less than stellar launch in its new markets.

Wolfgang Gruener is Director, digital strategy and content experience at American Eagle, where he specializes in strategic data analysis, user behavior models and information architecture (IA), as well as content strategy and governance. He was also Managing Editor of the website TG Daily and contributor to sites including Tom's Guide and Tom's Hardware.

  • somasaint
    obviously china/india have better things to do than drink koolaid
  • fazers_on_stun
    Didn't a recent article show the iPhone to be a bust in Japan, despite all the hype? The Japanese already had better phones. In fact, I think the iPhone is a bust in much of Asia. If the Chinese come out with a cheap but slick-looking imitation, Apple can kiss much of Asia goodbye...
  • in my country, argentina, the iphone costed me $516 dollars, with a $40 plan (the most economic plan, 3g limited).
    These are veeeeeery high prices, and the reason for a slow market adoption...
  • crosshares
    The problem is that Apple is letting all these carriers get away with severely marking up the price of the contracts, the phone itself, etc.
    The only way Apple's gonna make the third wave work is if they man up for the absolute mess they made and clean it up.