Orange Seals Apple’s iPhone Deal

France Telecom’s (FTE) subsidiary Orange UK has reportedly won the rights to distribute Apple Inc’s (AAPL) iPhone in the UK. The revolutionary handset will be available on Orange UK’s network in late 2009.

The deal effectively ends Telefonica (TEF) O2 UK’s two-year exclusive distribution contract to sell iPhones in the UK, which officially expires in October. However, O2 UK, which has been offering iPhone since November 2007 and has lured more than 1 million customers, will continue selling the handset in the UK.

Orange UK will market both iPhone 3G and the lastest iPhone 3GS through its direct retail distribution channels including on-line stores, shops and telesales channels. However, the company has not released any information regarding handset pricing and tariff structure.

Orange UK is currently the third-largest operator in the British mobile market with 21.5% share. However, the company remains challenged by the cutthroat price competition as its bigger rivals such as O2 UK and Vodafone (VOD) continue to boost their respective market shares through aggressive product/price offerings.

To strengthen its foothold in the UK ’s wireless market, Orange UK is merging with Deutsche Telekom’s (DT) subsidiary T-Mobile UK (fourth-largest mobile carrier in the UK ) under a 50-50 joint venture agreement. The combined entity would dethrone O2 UK as the largest wireless operator in the UK with roughly 37% market share and a cumulative subscriber base of approximately 28.4 million.

The iPhone deal represents a significant opportunity for Orange UK to further bolster its presence in the UK’s mobile market by attracting new high-end subscribers. The company will leverage its market leading 3G network to roll out the popular handset, addressing a significant portion of UK’s cellular user base.

iPhone represents a greater contribution to ARPU (average revenue per user) than regular wireless handsets. Moreover, iPhone subscribers uses more data services through web surfing, which will boost revenues and margins.

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