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Analysts split on iPhone 5 impact

Is it just another iPhone or the biggest hardware launch in history?

The new iPhone 5 could encounter difficulties in the region over LTE compatibility.
The new iPhone 5 could encounter difficulties in the region over LTE compatibility.

Apple Inc’s iPhone 5 is now finally on the market. But while US  consumers stroke the new streamlined chassis and coo over new features, industry analysts have been talking about wider issues.

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Product launch - iPhone 5

Apple’s new smartphone is not being treated as just another version by some pundits. Earlier this week JP Morgan’s chief economist hailed the iPhone 5 as a possible catalyst to marked growth in US GDP in the final quarter. "Calculated using the so-called retail control method, sales of iPhone 5 could boost annualised GDP growth by $3.2bn, or $12.8bn at an annual rate," Michael Feroli wrote.

Feroli’s underlying assumption was that 8m units would be sold in the US by year-end, a conservative estimate given Piper Jaffray analyst Gene Munster’s projection that 10m of the handsets may shift in September alone. Feroli’s estimate was also based on a retail price of $600, however, which is a considerable departure from the $200 to $400 range Apple announced at the launch.

UAE telcos Du and Etisalat have been tight-lipped on the availability of the new iPhones, but a late release is unlikely to deter hungry consumers. Dubai-based daily 7DAYS reported UAE retailers are poised to meet early demand, but customers may have to pay a premium of up to AED10,000 ($2,725) per phone.

Ashish Panjabi, CEO of Jackys said:  "We've being doing it in other years and I don't see us doing anything differently. It's a question of supply and demand and people who want it now - and are prepared to pay the price for it."


But while UAE consumers line up for a bite of the latest Apple gadget, some feel the “new” iPhone is anything but.

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Product launch - iPhone 5

“The iPhone as a brand is not new to the market and the vast majority of consumers who wanted and could afford an iPhone already own one so most of the iPhone 5 purchases will be replacement ones leading to relatively stagnant iPhone sales compared to volumes seen in 2012,” Mykola Golovko, Consumer Electronics Industry Analyst, Euromonitor International told ITP.net. 

“The UAE will likely be an exception to this with iPhone sales expected to grow by 40% compared to 2012, but this will largely be driven by tourist-shoppers,” Golovko added.

Smartphone penetration in the GCC has been growing steadily and next-generation handsets are grabbing a larger share of the overall mobile market. Euromonitor expects continued growth.

“It’s unlikely that the [iPhone 5] will cause a major shift in the smartphone market either globally or in the Gulf region in particular,” said Golovko. “We still expect smartphone adoption rates to continue rising in the region with volume sales of smartphones growing to over 60% of the mobile phone market in the UAE in 2013, a figure that is expected to reach 42% in Saudi Arabia in the same year.”

One issue that may hamper Apple’s share of this regional growth is possible incompatibility with high-speed networks implemented in the GCC region. The iPhone 5 is expected to be LTE-compatible. Long-term evolution networks allow faster streaming of data between devices than their 3G predecessors. In the Middle East the optimum bandwidths for deployment of LTE networks are often reserved for “incumbent government users” such as defence or interior ministries, according to Peter Lyons, director of spectrum policy, Africa & Middle East at the GSM Association.

When Apple launched the LTE-compliant iPad 3 in March the device had only been tested against the AT&T and Verizon networks in the US and did not work on European or Australian LTE networks. Will the LTE-enabled iPhone 5 encounter the same speed-bumps?

“The Apple issue really helped focus people’s minds,” Lyons told CommsMEA magazine last month. “Prior to that we have been raising this issue for several years and… when something like that comes up it becomes a tangible issue for regulators and policy makers to address.”


Matthew Reed, Principal Analyst, Middle East and Africa at Informa Telecoms & Media also highlighted the compatibility issue. “Middle East operators are using a range of LTE modes and bands. Also, there are some technical problems about voice services on LTE devices. It’s not clear that Middle East operators are ready yet to deal with those complications as those operators here that have launched LTE have only been offering data-only devices so far: mainly LTE-enabled USB modems.”

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Product launch - iPhone 5

As Apple's litigation battles mount, others agree with Euromonitor. The iPhone 5 may be just another iPhone.

Adam Leach, leader of Ovum’s Devices and Platforms practice, said: “Apple has successfully built the iPhone from a radical new entrant to the must-have smartphone. Whilst the company is still reaping the rewards of the brand equity of the iPhone, consumers are notoriously fickle when it comes to buying handsets. Without the continued innovation which we are accustomed to with Apple, the company risks losing consumer appeal. The iPhone re-defined the smartphone category in 2007 but it can’t rely on past success to guarantee its future or rely on litigation to keep its competitors at bay.”

Will the iPhone 5’s 200 new apps and tweaked architecture offer enough novelty for consumers to identify it as radically new? According to Bloomberg, 70% of Apple Inc’s profits come from the iPhone. An unsuccessful launch could hit the tech titan hard as it struggles to keep up with Google Android’s rapid gobbling of the market.

“It has become clear that technology companies need to do more than just announce new versions and updates to existing offerings if they are set on owning every aspect of the consumer’s digital existence. It is therefore imperative for these companies to move outside their traditional areas of expertise; hardware companies have to build up their software and service expertise and vice-versa, or risk leaving the door open to their competitors,” concludes Leach.