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Will Apple's IPhone Penetrate the Key Mobile Subscriber Growth Markets and Therefore Become a Force

The iPhone's revolutionary user interface has been lauded by everyone in the music and mobile content sectors. The iPhone is a great phone with a user-friendly interface that integrates a music player. Does this mean that it will dominate the world as many commentators claim? The answer to this question is no, even with the 3G version that will be available soon!

In the near to mid-term, there are just too many obstacles in the mobile market for the iPhone. We need to look beyond the iPhone's glossy sheen and consider the economic factors in order to gain a realistic picture of how it could dominate the global mobile market.

In most countries outside the US, the consumers have become accustomed to getting their phones "free", i.e., subsidised by network operators when they sign a contract monthly for data and voice usage. The first iPhone was not free. It came with a steep premium. This premium price is already a deterrent to long-term growth.

Let's look at key areas of growth in terms handset subscribers. In 2007, 90% of the global subscriber growth was in "emerging market". In the traditional western markets, penetration is already above 110% and growth has stagnated. The iPhone's high price makes it less likely that the device will be able drive growth in emerging markets, which are typically low- to mid-range handsets.

It is much cheaper to build a broadband cable network in the ground than it is to launch 3G. In Brazil, 36% of internet users first encountered the web via their mobile phones. This number is expected to rise dramatically over the course of next year across all emerging markets.

All traditional handset makers and operators agree that "emerging market" is where the real growth lies. Mobile phones have dominated these markets because they are cheaper than desktop computers. A premium-priced iPhone will not be able to easily break into markets with high growth rates.

In early 2008, the number of mobile phone subscribers worldwide surpassed 3,2 billion. Nearly 1.8 billion handsets have MP3 capabilities, and the number is increasing at a rapid rate. iPhone's first-year sales target was 10 million units - which is a small number in actuality. Apple could bring out tiers of features with tiered pricing, which would result in lower iPhone prices. (Which I believe they will do) Will this affect the share of Nokia, Motorola or Sony Ericsson's market in the near to mid-term? It's unlikely.

In the United States, the iPhone has made a significant dent in RIM's market share. RIM was the dominant smart phone maker in both the US as well as globally. Does this mean that the same thing will happen in other traditional markets, and most importantly "emerging market" segments?

The iPhone is the clear winner in terms of design and user interface. Most handset and network manufacturers have integrated digital music stores into their products/services. The competition between mobile phone solutions that are integrated with retail music offerings is fierce and has always been. The iPhone is the handset that provides the most satisfaction to users, as evidenced by a 50% increase in content and mobile browsing.

Will this still be sufficient to dent penetration rates of current incumbent handsets, whose market shares easily outnumber those of iPhones? Nokia believes that the growth of its handsets in emerging markets is key to maintaining dominance over other manufacturers. Apple seems to still be firmly focused only on traditional oversubscribed markets. It remains to be determined if the market is one that should be targeted in the near to medium-term. Apple's staff does not appear to have any interest in the developing markets. The emerging markets should also be considered, as the ratio between handset and PC growth exceeds 4:1. Most of that growth in mobile handsets is occurring in these developing countries.

Finaly, the iPhone has two benefits in my opinion. First of all it is the first handset that delivers a fully integrated experience. Second, it created a product that is envied by all other handset makers and which has no equivalent in terms of design, https://thefinalsmobile.com functionality, and user interface. The design and functionality will not suffice to dominate the market in the long term. I also believe that exclusivity for one network provider in each important territory would only drive consumers to react negatively. Like music subscribers, mobile phone users want to use the handset they choose on their preferred network.