iPhones enter open RI through the back door

The Jakarta Post ,  Jakarta   |  Mon, 07/14/2008 10:08 AM  |  Headlines

Apple Inc may have to ditch its contractual sale strategy for its new mobile phone iPhone 3G if the product is to be a success in Indonesia, business players say.

Apple Inc sells the iPhone as part of a contract via selected service providers in each country. The first generation iPhone was launched in 2007 in six countries, including the U.S.

However, the new 3G variant was launched last week in 20 countries outside the U.S., and Apple has said it is targeting a further 41 countries, including Singapore, where the phone will be bound to a contract of local service provider Singtel, and in the Philippines, in conjunction with Globe.

However, similar marketing schemes have failed to take off in Indonesia.

"Unlike some overseas markets, Indonesia's cellular market is already too open so it is difficult to employ the binding program," said Merza Fachys, chairman of the Indonesian Cellular Telephones Association.

He said service providers in Europe and Singapore offered subsidized handsets as part of long-term contracts.

"But our customers are not used to the idea of being bound by a 12- to 24-month contract. They usually switch providers very quickly," Merza said.

Indonesia's largest cellular provider, Telkomsel, has only 3.5 percent of its 50 million customers signed onto contracts, while Indosat, the second largest provider, has 4 percent of its users on contract.

"Indonesia's market is ruled by prepaid services," Johnny Suwandi, the president director of Indosat, told the Post.

However, Indonesia's service providers are currently locked in a fierce price war, and contractual agreements where a customer would be bound by a 12 month period may benefit revenue.

"I read that iPhone users use a lot of data service (which has a high profit margin) so it may help boost income, but we have not made any calculations," Johnny said.

"But looking at Indonesia's market, the open market model is more suitable."

However, even under a contractual agreement, the iPhone, which is priced at between $300 and $400, may not be offered at an initial mark down.

"With that kind of price and those features, it is considered cheap. We see other smart phones sold at more than Rp 7 million," Merza said.

Although Apple neglected to launch its product in Indonesia last year, illegally imported iPhones are readily available on the country's market, usually fetching between Rp 5 million and Rp 6 million each.

"We will bring in the latest one next week. The iPhone has been very well received and we are not the only ones doing it," a seller going by the alias of Yeti said.

She imports the phones from Hong Kong and Singapore.

The security feature embedded in the iPhone designed to prohibit its use with unofficial GSM providers was hacked soon after its launch.

"They came in their original packaging but we opened and unlocked them. There is no problem with basic functions and internet access, but users cannot access all functions, including software updates," she said.

"We have not been able to unlock the new one yet, but it is only a matter of time." (mri)

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