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This Carrier Exec Wants an Affordable iPhone, Too

By Evan Niu, CFA - Apr 4, 2013 at 6:00PM

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As European consumers face tough macro conditions, an affordable iPhone would give Apple some major inroads in the mid-range market. France Telecom thinks it's time.

It's not just investors and analysts that are calling for Apple (AAPL -1.07%) to release a more affordable iPhone to tap the mid-range segment. France Telecom (ORAN 2.06%) CEO Stephane Richard wants one, too.

In a recent interview with Businessweek, the carrier exec said that European consumers have become increasingly price sensitive amid the difficult macroeconomic conditions, noting that consumer behavior is "changing." That's led to an increased trend of consumers keeping the same devices but shopping for service, with escalating competition hurting carriers' pricing power.

The France business unit saw mobile average revenue per user (on an annual basis) steadily decline last year from $464 in the first quarter to $428 in the fourth quarter. The carrier closed out 2012 a total of 27.2 million French customers, which was mostly flat year-over-year.

France Telecom is in the process of reconsolidating under its Orange brand, which spans across numerous European countries. Unsubsidized iPhones cost roughly $600 in France, which Richard says is becoming "more and more difficult" to sell.

You'd think that the company would be more open to subsidies, though (it does subsidize but not as generously as U.S. carriers), since its Orange Spain subsidiary was a major beneficiary of rival carriers attempting to ditch subsidies last year.

Telefonica (TEF 0.61%) and Vodafone (VOD 2.67%) scrambled to bring subsidies back, after subscribers made it clear that they prefer the subsidy model. Vodafone Spain lost 639,000 customers in the second quarter, with Telefonica seeing 830,000 subscribers bail. Orange Spain welcomed plenty of those customers with open arms (and subsidies).

France Telecom is targeting $9 billion in operating cash flow this year, down from the $10.3 billion it generated last year.

Kantar Worldpanel ComTech's most recent figures show that iOS enjoyed some moderate market-share gains in the three months ending January 2013. Apple grew its share to 27.5%, up from 24.5% a year prior. An affordable iPhone would certainly be more appealing to cash-strapped European customers facing uncertain macro conditions.

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Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
AAPL
$145.54 (-1.07%) $-1.57
Vodafone Group Plc Stock Quote
Vodafone Group Plc
VOD
$15.02 (2.67%) $0.39
Orange Stock Quote
Orange
ORAN
$12.36 (2.06%) $0.25
Telefónica, S.A. Stock Quote
Telefónica, S.A.
TEF
$4.95 (0.61%) $0.03

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