November 27, 2007 / 8:11 AM / 12 years ago

UPDATE 2-Fr Telecom sees near 100,000 iPhone sales by year end

(Writes through with details, background, analyst quotes)

By Cyril Altmeyer

PARIS, Nov 27 (Reuters) - France Telecom’s FTE.PA Orange unit expects to sell nearly 100,000 Apple Inc (AAPL.O) iPhones by the end of 2007, France Telecom said on Tuesday as the third leg approaches of a closely watched European launch.

The iPhone, with its touch screen, music player and Internet browser, goes on sale in France on Wednesday, almost three weeks after its British and German debuts, amid investor scrutiny of a contract model that is untested in mainland Europe.

French competitors Vivendi’s SFR (VIV.PA) (VOD.L) and Bouygues Telecom (BOUY.PA) have prepared a hostile reception committee, this month launching offerings including 3G+ access — a service Orange’s iPhone contract does not provide.

But Apple is betting the cult status of the device will be enough to persuade people to buy the iPhone despite the fact that it is both unsubsidised and tied to contracts with operators who have exclusive Apple deals.

In the United States, Apple sold 1.1 million iPhones in the quarter to end-September for up to $3,000 each including a compulsory two-year service contract with AT&T (T.N).

In France and Germany, legal considerations have forced Apple’s preferred partners Orange and T-Mobile (DTEGn.DE) to also offer iPhones that are not locked to their own networks — albeit at a higher price.

CONTRACT REVENUE

Orange will offer an unlocked i-Phone at a price “significantly lower” than the 999 euros ($1,485) proposed by T-Mobile in Germany, Didier Lombard, France Telecom’s chief executive, told Europe 1 radio in an interview on Tuesday.

He predicted 100,000 sales by the end of the year, a projection which analyst Carolina Milanesi of research group Gartner called “reasonable”.

Handsets locked into the Orange network will be priced at 399 euros — the same price Deutsche Telekom’s T-Mobile is charging for locked iPhones in Germany — and Orange will share contract revenue with Apple.

Unlocked iPhones are not available in Britain, where the locked-in model is more accepted by consumers.

Full details of sale prices will be published on Wednesday morning but Lombard gave some indications. He said a 24-month contract would start at 49 euros a month including two hours of communications and 50 text messages.

The price would be 4.50 euros more per month for a 12-month contract, the minimum term, he said.

Analysts said the jury is still out over whether the iPhone will take off in Europe. “There’s an irrational side to a decision to buy an Apple trademarked iPhone which makes it difficult to predict sales,” said Gontran Filet, a consultant with telecoms industry think-tank Idate.

Gartner’s Milanesi said the locked-in contract model may eventually need to be dropped because it is undermined by the obligation to offer an unlocked phone as well.

In the long term, Apple may have to abandon the exclusive contracts because the situation in France and in Germany will put pressure on them, she said. (Additional reporting by Dominique Vidalon and Andrew Callus in Paris, Tarmo Virki in Helsinki, Nikola Rotscheroth in Duesseldorf and Georgina Prodhan in Frankfurt; Editing by Quentin Bryar and David Holmes)

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