Vodafone Deal Signals Change in Apple’s iPhone Distribution Strategy

Today Vodafone announced it will offer the iPhone in 10 new countries. The deal gives Apple a much-needed shot in the arm at a time when its international strategy seemed to be faltering.

Vodafone will sell the iPhone “later this year” in Australia, the Czech Republic, Egypt, Greece, Italy, India, Portugal, New Zealand, South Africa and Turkey. At its most basic level, the deal fulfils Apple’s long-stated commitment to make the iPhone available in Asia. Of more interest is that Apple is moving away from its exclusive approach to distribution.

The four-line press release from Vodafone is conspicuous by the absence of one word: “exclusive”. The non-exclusive nature of the deal is underlined by the recent announcement that TIM in Italy will also offer the iPhone. This is the first time two network operators in the same country will offer the device side by side. I think Apple has recognised that its exclusive deals with operators pushed more people to unlock iPhones and meet demand from customers on competing networks who wanted Apple’s hot product.

The deal vindicates Vodafone’s initial reluctance to take the iPhone when it was first announced. There were some who thought Vodafone had made a serious error of judgement in not securing this much-hyped product at launch. I think hindsight has proved it was the right decision.

It’s unlikely we’ll ever know the commercial terms of Apple’s agreement, but I bet Vodafone’s getting a much better deal than it was offered 12 months ago. I predict Vodafone will shy away from offering 18- or 24-month iPhone contracts in some markets, particularly as some of the 10 countries mentioned in the agreement have a lot of prepaid phone users — Italy, for example. I suggested a couple of weeks ago that Apple should consider prepaid users for the iPhone.

Whether Apple will go further and allow Vodafone to offer the iPhone in markets such as the UK, Germany and France remains to be seen. Apple would have to renegotiate its exclusive deals with O2, T-Mobile and Orange. We don’t know how long those operators have exclusive rights to the iPhone, but untangling the agreements won’t be a simple task. The agreements will also limit the availability of a 3G iPhone in three of Europe’s four biggest markets.

The deal with Vodafone gives Apple a good mix of new countries. I think the agreement is related to the expected announcement of a 3G iPhone in the near future, especially as Vodafone has 3G networks in seven of the 10 target markets.

This new, more open distribution strategy by Apple is sensible, given how many iPhones are being connected to a different network than the one they’re intended for. If the recent frenzy of iPhone purchases by unlockers in the UK following the £100 price drop is anything to go by, international transhipments of iPhones continue unabated — a situation that Apple must be keen to overcome.