Apple takes 10% of O2 iPhone revenues

O2 insiders have confirmed it has agreed to give around 10 per cent of user revenues to iPhone manufacturer Apple as part of its exclusive UK deal to sell the device.

Recent reports suggested O2 had ceded as much as 40 per cent of user revenues to Apple. But O2 insiders said it was closer 10 per cent, although neither O2 chief executive Matthew Key nor Apple chief executive Steve Jobs would comment on the terms of the deal at its launch.

Jobs also refused to comment on whether O2 would take a share of over-the-air iTunes revenues as part of the agreement. But he said: "We’re not going into that but, conceptually, that makes sense."

Jobs acknowledged that Apple’s negotiations with other UK networks over the device had annoyed some. He said: "It is like getting married. You date different people before you get married. We’re now married to O2, and there are some angry ex-girlfriends out there."

The 8GB iPhone model launches in the UK on O2 on November 9, priced at GBP269. It will be available through O2 and Apple outlets, as well as Carphone Warehouse stores. O2 UK chief executive Matthew Key said: "We have 1,300 points of distribution in the UK. Over 90 per cent of the population should be within 20 minutes’ drive of a store."

O2 reckons it can lure 40 per cent of rival networks’ high-end users in the UK with the iPhone. Key said: "Eighty per cent of our own high-value customers want an iPhone and 40 per cent of our rivals’ higher-value customers want an iPhone and would switch networks to get one."

O2 will install an iPhone "expert" in each outlet and is in the process of setting up a call centre with 1,000 support staff specifically to take customer calls relating to the iPhone.

O2 has introduced new iPhone tariffs at £35, £45 and £55, which all include unlimited data usage. Unlimited data packages will be available across all O2’s tariffs shortly, said Key.

The iPhone works on Wi-Fi and EDGE networks. It switches between networks automatically, as they come in range. O2 has a deal with Wi-Fi hotspot provider The Cloud so iPhone users can use all its 7,500 UK hotspots free of charge as part of the new unlimited data tariffs. O2 said that it will have 30 per cent EDGE coverage by the time the iPhone launches.

Jobs said the battery life of current 3G chipsets is not good enough yet to justify launching a 3G iPhone. He said: "Talk time on GSM handset is five-to-six hours, and half that on 3G phones. If the phone is used for internet browsing and music playback, the battery life is reduced further. And the only thing you really need 3G speeds for is internet browsing. So, rather than cut the battery life down to run it on 3G, we have introduced Wi-Fi, which is energy efficient and way faster than 3G anyway, and energy-efficient EDGE technology."

Key said: "O2 is about bringing great experiences to the customer. It is not by accident that our customer numbers and our profits have grown by more than all the other operators combined in the past five years. We have had breakthroughs – like the fact we carry 40 per cent of all text messages in the UK and bold moves such as The O2. This is another breakthrough in terms of great experience."

Apple sold one million iPhones in the US in its first 74 days and is targeting 10 million sales globally next year.