In Business Standard

The new 3G iPhone is the talk of the town. But to us Indians, we will have to wait till “later this year” before we can legally own one. There’s more to the iPhone 3G than what meets the eye and here I dissect the details that you really should know.

Think of a good phone for businessmen and what comes on top of mind is the Blackberry. Maybe a Nokia E-series phone. Apple iPhone really doesn’t figure in the list. It after all, has a strong ‘high-end consumer phone’ image.With the launch of the new iPhone 3G this week, Apple has gone on to to rectify that image and take the Blackberry head on in the business phone space. It now has ‘push email’ which means that emails instantly appear on the phone without you needing to log in to check. This is the number one need that businessmen look for in a business phone. Throw in a wireless synchronisation with PCs, central manageability and encryption and you have a phone that meets the enterprise needs.

The real reason why the iPhone 3G is in the news though is because of the radical cost cutting. The price of the phone was slashed to just $199, almost a third of the original cost just a year ago. Now, I know what you did right after you heard the cost. You did a quick mental currency conversion to Indian rupees ($199 * 43 = approx Rs 8500) and then went ‘Wow!’ Even with taxes, I’m assuming they will price it below the psychological Rs 10,000 mark. Maybe Rs 9,950. Now, don’t get too excited until you understand the real picture.

Have you ever stopped to ask yourself, “How could a phone with more memory, better technology (3G/GPS), better battery life and slimmer be one third cheaper? Here’s how.

First, You can’t just walk to a mobile store, pay about Rs 9950, pick up the iPhone and walk away. You’ll have to sign a long term contract (approx two years) with either Airtel or Vodafone, the mobile operators that Apple has tied up in India. Both Airtel and Vodafone are tightlipped about what the monthly rates are but the US rates give a rough indication of the costs. AT&T, the service provider in the US, charges $30 (approx Rs 1,200) and for business use, it is $40 (approx Rs 1,600). There’s a good chance that the costs in India will be around these figures.

The truth be told, Apple really isn’t slashing its cost of handsets. It’s just passing on the slashed cost to the mobile operators. Apple sells the phone to Airtel and Vodafone for a little lower than the original cost of $399, maybe for about $350 (approx Rs 15,000). While Airtel or Vodafone may sell it to you for about Rs 9,950, they will recover the loss by a slightly higher monthly charge over a two year period.

It’s a brilliant strategy, if you ask me. Reduce the entry cost, hook the guy and make him pay long term. It’s a strategy that has always worked well in India. After all, we have all been suckers for EMIs before.

Another reason for the lower cost is because Apple has made some cost-cutting design changes like replacing metal with a durable plastic case. More volume means lower cost per handset.

There’s an important reason why Apple has chosen to reduce the entry cost. Bigger user base. Yes, Apple wants more people to use its handsets because eventually we will start buying applications for the phones. Apple has launched the AppStore where applications that developers have built will be sold. It’s a smart decision by Apple to give access to independent developers to build applications. It has even instituted about $100 million as venture fund to fund these development projects. It is estimated that the AppStore will earn Apple about $1.2 billion. So, clearly, it’s not just handsets sales alone anymore. It’s the services.

Even though Apple is very tight-lipped about the launch date, I heard from reliable sources that it will be “around festive season” which should be Diwali. Pre-registration may start much earlier.