Software giant Apple Inc. is rolling out iPhone handsets in Israel this week, two years after the US launch.
"As a grand finale to one of the most eventful years in the Israeli telecommunications space, the three main carriers in Israel are shortly due to launch the iPhone," Merrill Lynch analyst Haim Israel said Monday in a report. "Israel is a more fertile ground in our view than the US. We think it is unlikely to have a major impact on subscriber numbers or market share, but it will be positive for data revenue.
"Also, as the three leading players are all offering iPhones, we do not anticipate large-scale customer migration from one carrier to another or that any single player will be overburdened with marketing expenses."
Apple, which is represented in Israel by iDigital Ltd., will launch the 3GS iPhone simultaneously through Partner Communications, Cellcom Israel and Pelephone Communications. The iPhones will go on sale at 12:01 a.m. Wednesday night.
IDigital, which opened the first Apple store in the Ramat Aviv Mall last year, will sell the iPhones at Dizengoff Center in Tel Aviv on Thursday and launch a concept store at Haifa's Grand Canyon Mall at the end of the month. Pelephone announced Sunday that it had signed a cooperation agreement with iDigital to sell iPhones at the three stores.
All three carriers had committed to buying a minimum of 80,000 iPhones a year for the next three years, amounting to 2.7 percent of all mobile phones in the country, Israel said. According to surveys by the three companies, 25% of cellular subscribers, or 1.4 million users, are interested in buying an iPhone, and almost 30% would leave their current provider if it was not selling the iPhone.
"Selling the entire stock of iPhones in the first year will not pose a challenge," Israel said. "We estimate that they will sell more than this. About 300,000 iPhone sales will be sold in the first year, reaching 3.5% of total handsets."
"The operators are expected to subsidize each phone by NIS 2,000," he said. "Consumers will pay NIS 800. Customers will be charged a fixed monthly fee for the iPhone, a monthly call package and a fee for a monthly data package." If companies give a subsidy of NIS 2,000 per handset, the customer pays NIS 800 and the providers charge a monthly fee of NIS 150, the payback period is calculated at 13 months, he added.
"Given the consolidation of the Israeli telecoms market, there is little incentive for the operators to enter into a price war, as this would hurt both profits and cash flows," Israel said. "In this context, we do not expect customers to get a direct subsidy for surfing.
"The immediate impact of the handset subsidy will be felt in lower profitability, but the companies will benefit in the long run from an average revenue per user uplift due to higher data usage, subscription fees and the sale of iPhone-related services. The full impact of the iPhone should be visible in financial year 2010."