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O2 UK iPhone ad campaign 'to cost millions'
Christmas is coming...

By Reuters

Published: Friday 05 October 2007

O2 and Apple plan to launch a multimillion-dollar joint advertising campaign later this month as they get ready to bring the iPhone to Blighty.

O2 UK, which is owned by telecommunications group Telefonica, declined to divulge the size of its marketing budget for the television and poster campaign, which kicks off two weeks before iPhones go on sale in the UK on 9 November.

Chief executive of O2 UK, Matthew Key, told a journalist it would be the company's "most significant campaign" in the run-up to the holiday retail season - but that it would cost well short of $40m.

Key also said he believed 80 per cent of O2's high-value customers wanted an iPhone, while 40 per cent of the higher-spending customers on rival networks would be prepared to switch operators to get the handset.

Apple, which broke into the mobile phone market when it unveiled its iPhone in January, has flouted European telecommunication conventions by not allowing its handsets to be subsidised and by demanding a share of voice as well as data revenues.

The terms of the deal between the two companies have not been published for commercial reasons.

But analysts speculate O2 was prepared to give away 20 to 30 per cent of voice and data revenues in return for clinching an exclusive, "multiyear" contract to sell iPhones, which combine Apple's popular iPod music player, a video player and web browser in a slick, touchscreen handset.

However, Key also noted "it would make sense" for Apple to also give a revenue share to O2 in return for using its network.

He said the phones - which will sell for about $550, including tax, to customers willing to sign up for an 18-month contract - would "absolutely" secure a profitable deal for O2.

O2, which has declined to divulge customer targets, is banking on iPhones helping to fuel customer demand for non-text mobile data services such as music and video, which currently account for only five per cent of annual group revenues.