iPhone Freedom Is Costly in Europe

Would you pay US$1,478 for an iPhone? France Telecom's (NYSE: FTE) Orange subsidiary didn't think so. That's why Orange is offering iPhones in France for the door-bustingly low price of only $959.

U.S. readers aren't seeing typographical errors. Those truly are the prices being asked in France and Germany for iPhones. The payoff: The devices come "unlocked," meaning they will work on the user's network of choice.

The nearly $1,500 price is what T-Mobile charges for unlocked iPhones in Germany. Orange on Wednesday began offering the devices, both locked and unlocked, in France.

Lock-In for Savings

Prices for the popular units are a little more down to earth when iPhones are locked to specific networks and sold with packages by the carriers. Both T-Mobile and Orange are charging about $591 for the phones and imposing additional monthly "tariffs" as part of various packages.

In the U.S., where AT&T (NYSE: T) is the sole carrier authorized to sell iPhones, the devices were initially sold for about $600. They now go for $399.

Since shortly after the iPhone's late-June debut in the U.S., hackers have been offering methods of unlocking the gadgets despite stern warnings from Apple (Nasdaq: AAPL) that doing so could irreparably harm the devices.

Paying a Premium

While U.S. residents are likely to believe even Orange's $959 price is outlandish, NPD Group analyst Ross Rubin said things are different in Europe. There will be people willing to pay the premium price to avoid being locked in to specific carriers, he said.

"There's certainly a much stronger history or tradition in Europe of consumers paying more for handsets that don't have a service obligation attached to them," Rubin told MacNewsWorld. "You historically had a lot of roaming among countries. You've had the unified GSM (Global System for Mobile communications) standard which has facilitated that and you've had SIM (Subscriber Identity Module) cards that can be freely moved among handsets and offer the kind of flexibility we are just starting to move more toward in the U.S., with things such as the Verizon announcement [Tuesday] that it will open up its network."

Overpriced for a Reason

The high prices being charged for unlocked iPhones is an obvious attempt by T-Mobile and Orange to push would-be iPhone owners into buying the less-expensive locked-in versions, Strategy Analytics analyst Chris Ambrosio told MacNewsWorld.

"The tremendous gap in pricing between the locked and unlocked versions may simply reflect a supply-side maneuver to encourage purchase of the locked phone," said Rubin. "Clearly, the carrier benefits much more from that."

Few, if any, people are likely to go for the unlocked iPhones, Ambrosio believes. "Users can pay less than half that price if they buy a SIM locked one," he said. "This high price is T-Mobile's direct response to the regulatory requirement to having to sell it unlocked. Unlocked devices can be bought from T-Mobile, but used on any network, meaning T-Mo gets no revenue whatsoever."

The carriers "would likely still have to reimburse Apple for its required bounty" for selling the device, Ambrosio noted. "The end game is that ... no one will buy it at that price," he said. "If they are not able to offer the locked version at a lower price, then they will not sell enough iPhones to fill up my trunk."

A Future Price Cut?

Apple came under some substantial criticism when it cut the price of the iPhone by $200 in September. Rubin would not predict whether a similar price cut will take place in the future for European buyers, but he expressed some doubt.

"One of reasons Apple cut the price was to stimulate more holiday season sales here through its Apple store in particular," said the analyst. "Apple hasn't built out the Apple stores to the extent in Europe they have here in the U.S."