France Telecom CEO says iPhone sales threatened by lack of cheaper option

Posted:
in iPhone edited January 2014
European consumers are cutting back spending in the face of a fragile economy, and the CEO of one telecom says that could signal tough times ahead for Apple's iPhone.

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France Telecom Chief Executive Stephane Richard said that his company has seen prices dropping by 25 percent over the past three years, as carriers are forced to provide cheaper plans to lure consumers, speaking with Bloomberg. Along with the preference for cheaper plans, consumers are also beginning to look for cheaper devices.

"We are in a period of changing consumer behavior," Richard said. "Selling a phone for $600 is getting more and more difficult."

France Telecom cut its mobile service plans by 10 percent in 2012, and the carrier expects to cut prices by another 10 to 12 percent in 2013. Currently, its cheapest plan gives unlimited texts and calls plus 3GB of data for about 20 euros ($26) a month. Still, competition is pushing France Telecom's prices lower, and Richard says the market for users that will buy Apple's relatively pricey handset is shrinking.

"There are fewer early adopters, and probably with the next release of the iPhone this will be evident," Richard said, noting that this year's new model may see smaller pre-release lines than have previous iPhones. "Except for a few hundred thousand people who will buy the latest iPhone ? except for that category of people ? the majority of the market will be difficult."

Richard doesn't specifically call for Apple to introduce a cheaper version of its top-selling handset, but his remarks do jibe with a growing sentiment that the iPhone maker should do so in order to sustain growth and market share. The premium smartphone market is thought to have largely matured, and especially so in western countries like France, where consumers face an uncertain economy and are making tough choices when it comes to buying technology.

Apple has been rumored to be working on a low-cost iPhone for some time. Most recently, the company is said to be planning to reveal such a device later this year.

While rumors have pegged a new, contract-free low-end iPhone as a device targeted at emerging markets like China, Richard's comments suggest that a less expensive Apple handset could also find a niche in more traditional markets.
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Comments

  • Reply 1 of 67
    richard getzrichard getz Posts: 1,142member
    Well if the French say it, it must be true!
  • Reply 2 of 67
    matrix07matrix07 Posts: 1,993member


    Bloomberg again. :roll eyes:

  • Reply 3 of 67
    richard getzrichard getz Posts: 1,142member
    "Still, competition is pushing France Telecom's prices lower"

    The real reason for lower prices?

    "There are fewer early adopters, and probably with the next release of the iPhone this will be evident,"

    And probably?

    "may see smaller pre-release lines"

    May see?

    "The premium smartphone market is thought to have largely matured"

    Thought to have?

    Everyone seems to want to be that 'guy' that foretells of Apple's doom. Because how dare Apple sell a premium product at a premium price and people stand in long lines for hours (days) to purchase them. We much rather rally behind those that took Apple's innovation and went to market with a 'me too' but cheaper, less desirable product*.

    *the only reason why you see cheaper phones doing well is because they are phones. There is a huge majority of people that I deal with that tell me "it's just a phone, why do I need all of that?" then I ask, "well, why did you purchase the Samsung?" "Because it was like $20 more than the flip phone and it has a bigger screen"

    So this tell me that the vast majority of people just want a phone as a phone and if they can get one with a big screen (compared to flips) and it not cost too much, I'll buy it. These people (no, I have not talked to millions of them) tell me they are only interested in talk, text, and maybe sharing/viewing some photos. The older crowd is not even interested in text and photos as much as the bigger screen so they can see the buttons.

    With the iPad and iPod, you have a different segment with a different higher end need than I want a phone. iPods and iPads are not necessities (I know, heresy) in todays time as a phone is, so people demand more from these products. This is where Apple has always outshines the competition and why they own both of those spaces.

    Sorry for the long rant.
  • Reply 4 of 67
    slurpyslurpy Posts: 5,085member


    Jesus Christ. Why is this news? Apple products, historically, have been affected LEAST by the economy of any country. Everyone shrieked at how Apple products were going to become irrelevant during the crash, yet it had absolutely no effect on sales, which increased, while sales of cheaper options dropped. Apple is not going to come out with a product simply to cater to the "economy" or for the economic conditions of a certain region at a certain time. They will make a "cheaper" option if it makes sense and fits with their product line, is differentiated enough from everything else, has a reason to exist, and meets their design goals. Not, "hey the economy is shit we need a cheaper phone"- that has never, EVER benefitted any company. 

  • Reply 5 of 67
    isaidsoisaidso Posts: 750member
    The only thing Apple has to lose, is a race to the bottom. That is a race that Apple can never, ever, ever win.
  • Reply 6 of 67
    Please push down more so I can buy more !!
  • Reply 7 of 67
    umrk_labumrk_lab Posts: 550member


    negotiation gimmick .... (futile, of course)

  • Reply 8 of 67
    paxmanpaxman Posts: 4,589member

    Quote:

    Originally Posted by isaidso View Post



    The only thing Apple has to lose, is a race to the bottom. That is a race that Apple can never, ever, ever win.


    The concept of a cheaper iPhone - with a more expensive option also available, is odd. If the two have the same features, why would anybody go for the expensive model. emerging market or not? For Apple to create a feature limited iPhone beyond speed and capacity also strikes me as odd and not like Applesque thinking. I would think the differentiation would need to be along the lines already in play - old model lower price. Perhaps an old model can be repackaged in a cheaper enclosure, but I echo what others have been saying, that for Apple to produce anything but a premiere experience will be counter productive in the long run.


     


    The iPhone 4S is still a very capable phone for the vast majority of people.

  • Reply 9 of 67
    maccherrymaccherry Posts: 924member
    Anything to make investors nervous.
    I swear Appleinsider has become a troll site by the very folks that run it.
    Apple is high end baby and it sells and if you can't afford one then do what rationale folks do and save your damn money until you can afford one.


  • Reply 10 of 67
    danv2danv2 Posts: 29member
    Um, since when is this site jumping on the cult of marketshare bandwagon? Apple doesn't care about marketshare. Profits are all that matter, and every quarter those profits are huge. No, they're not declining.

    France is facing a huge recession. They are going broke, don't work, and their unions are stuffing their channels with jargon when they already work a six hour day. Poor governance is killing them, and they are trying to place blame everywhere but with themselves. This telecom leader is a prime example.

    I'd say France needs to look at the policies it has in place, and question whether or not it wants to stop inflicting self injury.
  • Reply 11 of 67
    rob53rob53 Posts: 1,973member

    Quote:

    Originally Posted by paxman View Post


    The concept of a cheaper iPhone - with a more expensive option also available, is odd. ....



    If Apple actually comes out with a throwaway phone, it won't have the same features as the current phones. It will be limited in functionality, feature set, specifications, and (unfortunately) build quality. Apple is not going to produce a low-cost phone that would compete directly with their current iPhones. That would be corporate suicide. 


     


    On the other hand, if they came out with an unlocked basic phone with minimum features, I might be tempted to buy one to use when traveling in Canada and Europe (just for emergencies).  

  • Reply 12 of 67


    The guy is right. It is silly to be self-blinded because of your desires. I am very concerned about the lack of proactivity of Apple's board.


     


    A year ago, we were all thinking Apple would sell 60m, even 70m iphones per Q with the arrival of iphone5 (remember, "unstoppable demand"?) . Then, supply issues tried to convince us that it was not a matter of shrinking demand. That may or may not be true; but the real consequence is that the demand, perhaps even because of that lack of supply, end up shrinking. The very same Apple has validated the droid alternatives, leaving low-income markets uncovered, not properly giving the high incomers what they wanted and when they wanted (larger phone, IFC, etc).


     


    Now we are waiting forever some action of the management regarding China Mobile (years hearing this story), cheaper phone, larger phone, stock buyback, higher dividend, iTV (at least two years ago the "cracked" this), iRadio... and nothing at all happens except piling cash absurdly; instead we have lower margins, growth stalled, iphone supply issues, imac supply issues, map app problems, execs leaving the company, competitors providing equal or better products at lower prices, iPad mini cannibalizing his big brother, stock downgrades, options blatant manipulation, and the stock in free-fall, with Cook & Partners doing nothing...


     


    I give up on Apple.

  • Reply 13 of 67
    jungmarkjungmark Posts: 6,626member
    Wait, is France giving up? The "Low cost" iPhone is the 4/4S.
  • Reply 14 of 67
    jdnc123jdnc123 Posts: 233member

    Quote:

    Originally Posted by danv2 View Post



    Um, since when is this site jumping on the cult of marketshare bandwagon? Apple doesn't care about marketshare. Profits are all that matter, and every quarter those profits are huge. No, they're not declining.



    France is facing a huge recession. They are going broke, don't work, and their unions are stuffing their channels with jargon when they already work a six hour day. Poor governance is killing them, and they are trying to place blame everywhere but with themselves. This telecom leader is a prime example.



    I'd say France needs to look at the policies it has in place, and question whether or not it wants to stop inflicting self injury.


     


     


    It is guaranteed that profits will drop this quarter versus the same quarter last year.  Apple has said as much.  Expect guidance for June quarter well below expectations also.  I think it will be very difficult for Apple to grow earnings in fiscal 13 vs F12.  Street consensus is for a drop in earnings.  The company simply got caught in its own inertia and its product cycles are too slow to remain in the narrative with consumers, so top line has slowed or outright stalled and margins are being pressured. Samsung is attacking Apple on all fronts.  Honestly, its tough to tell if Apple is playing offense or defense...they aren't playing anything at the moment by being quiet.  Its time to put up or shut up.  Are the products great.  Yes.  Can they possibly get their mojo back and retake the momentum?  Sure.  The reality is earnings growth is flat at best but more likely negative this year.  If there aren't signs soon that Apple can grow in 2014, this stock is toast for a long time.  Of course they can grow eps simply by buying stock.  It is no surprise Tim Cook is waiting until earnings to announce a cash plan..... forward guidance will be horrible so he probably want to reduce the pain with a positive announcement.  With rapidly slowing iPhone sales, the gross margin in the June qtr could really get pressured due to mix. 

  • Reply 15 of 67
    jungmarkjungmark Posts: 6,626member
    mieswall wrote: »
    The guy is right. It is silly to be self-blinded because of your desires. I am very concerned about the lack of proactivity of Apple's board.

    A year ago, we were all thinking Apple would sell 60m, even 70m iphones per Q with the arrival of iphone5 (remember, "unstoppable demand"?) . Then, supply issues tried to convince us that it was not a matter of shrinking demand. That may or may not be true; but the real consequence is that the demand, perhaps even because of that lack of supply, end up shrinking. The very same Apple has validated the droid alternatives, leaving low-income markets uncovered, not properly giving the high incomers what they wanted and when they wanted (larger phone, IFC, etc).

    Now we are waiting forever some action of the management regarding China Mobile (years hearing this story), cheaper phone, larger phone, stock buyback, higher dividend, iTV (at least two years ago the "cracked" this), iRadio... and nothing at all happens except piling cash absurdly; instead we have lower margins, growth stalled, iphone supply issues, imac supply issues, map app problems, execs leaving the company, competitors providing equal or better products at lower prices, iPad mini cannibalizing his big brother, stock downgrades, options blatant manipulation, and the stock in free-fall, with Cook & Partners doing nothing...

    I give up on Apple.

    Good, then leave. Oh and who thought Apple would sell 60/70/80 MM iPhones per qtr. I didn't and the majority of posters didn't. 50 MM, maybe but they were close.

    You also complained about lower margins. What makes you think a "low cost" iPhone won't affect that?

    It's been a whole three years since Apple last innovated! /s
  • Reply 16 of 67
    jdnc123jdnc123 Posts: 233member

    Quote:

    Originally Posted by jungmark View Post





    Good, then leave. Oh and who thought Apple would sell 60/70/80 MM iPhones per qtr. I didn't and the majority of posters didn't. 50 MM, maybe but they were close.



    You also complained about lower margins. What makes you think a "low cost" iPhone won't affect that?



    It's been a whole three years since Apple last innovated! /s


     


    The market will accept lower margins if the top line increases such that the overall notional gross margin dollar amount is larger.  The market doesn't want to sit around and watch margins bleed while Apple does nothing to address top line to offset the margin drop.  


     


    For those paying attention, the value of Apple (meaning enterprise value) is about where it was 2 years ago.  Any move up in stock since then has been offset by cash build, so the underlying business hasn't increased in value at all at this point (of course it had).  Probably one of only a handful of companies in the market where no value creation in 2 years.  Focus on making great products is great, but they need to do so in such a fashion that it increases the value of the company.

  • Reply 17 of 67
    lukeilukei Posts: 329member
    Meanwhile in the UK all networks including those owned by France Telecom are putting prices up! This seems like a PR piece for FT price cuts in France
  • Reply 18 of 67
    jungmarkjungmark Posts: 6,626member
    jdnc123 wrote: »
    The market will accept lower margins if the top line increases such that the overall notional gross margin dollar amount is larger.  The market doesn't want to sit around and watch margins bleed while Apple does nothing to address top line to offset the margin drop.  

    This is why the market sucks. They want a low cost iPhone which will lower margins but want margins to remain the same so Apple needs to raise prices or have a more expensive iPhone. But cheaper will sell in greater numbers than expensive so the margins will fall and canibilize the existing iPhone so margins will fall there as well.
  • Reply 19 of 67
    gazoobeegazoobee Posts: 3,754member

    Quote:

    Originally Posted by rob53 View Post


    If Apple actually comes out with a throwaway phone, it won't have the same features as the current phones. It will be limited in functionality, feature set, specifications, and (unfortunately) build quality. Apple is not going to produce a low-cost phone that would compete directly with their current iPhones. That would be corporate suicide. 


     


    On the other hand, if they came out with an unlocked basic phone with minimum features, I might be tempted to buy one to use when traveling in Canada and Europe (just for emergencies).  



     


    That's just it though, what features could they possibly drop on a cheaper phone?  I've been thinking about this for ages and haven't come up with a good answer.  


     


    - they need the app store and the ability to play apps/games on every phone or ... what's the point? marketshare?


    - they need basic wireless, bluetooth, cell etc. or again ... what's the point?  


    - it's cheaper to use the integrated chip that gives LTE than it is to use the old junk ... and the old junk is available on the old iPhones already anyway. 


    - a cheaper plastic housing would only make a slight difference in cost


    - lower storage would just hamper the sales of app store stuff ... and lower storage is available on old iPhones already anyhow. 


     


    Unless they are making a simple "feature phone" that doesn't do apps at all or only does old iPod apps or something, then I don't get what the point of it is.  Even then, why would they want to make a feature phone?  Maybe, maybe, maybe they are just making a cheap shell that last years's parts could be thrown into instead of continuing to actually sell last year's phone?  


     


    Apple tends to surprise so I would never say never, but I don't see any rational argument for a cheaper phone myself.  

  • Reply 20 of 67
    solipsismxsolipsismx Posts: 19,566member
    jungmark wrote: »
    The "Low cost" iPhone is the 4/4S.

    In comparison to the newer iPhone it is but it's still expensive. In the US the iPhone 4 from 2010 retails for $450 for 8GB. How much is that same phone in France?
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