Comment: Why has the iPhone price been slashed?

Apple not following suit but why?

16 April 2008 0:40 GMT / By Stuart Miles

O2 and Carphone Warehouse have slashed £100 off the Apple iPhone, but as Apple refuses to follow suit, still listing the 8GB model on its website at £269, why have the two companies made the decision to reduce the price?

It's a strange move when you consider that both companies constantly say that the iPhone has been their best selling phone ever.

Many believe that the price reduction is because of a need to shift stock ahead of a 3G iPhone launch, which is believed to be in June, coincidently the same time the limited £100 offer ends (my personal bet is that the UK won't get a 3G iPhone until November in time for Christmas).

If such a rumour is true, it's clear that O2 and Carphone Warehouse will be keen to offload as many of the 8GB models as possible before a new model hits the high street and demand for said phone dries up completely. T-Mobile moved to reduce the price of its iPhone offering earlier in the year in what is seen as a similar move.

That theory would also fit into why the newly announced 16GB model hasn't been reduced one bit.

However the question that really needs to be answered is why drop the price so drastically in the first place? At the current promotion, the iPhone is now £30 cheaper from O2 than the iPod touch without phone capabilities, from Apple.

Okay so mobile phones, thanks to the massive subsides that operators give to entice you in have always been cheaper, hoping they'll reap back the benefits from your contract over the next couple of years.

In the Apple iPhone model however, you'll be able to buy the phone from O2 or Carphone Warehouse at the cheaper price without a contract and never register it on the O2 network if you plan to unlock it from the get go (it's done through iTunes remember), meaning the benefits of signing up the customer on a contract will be lost.

Does this mean that the margins are so massive on the iPhone that O2 can afford to do this or are they simply hoping that people won't be that clever or devious?

Surely Apple can't be price protecting the offer? If it is secretly doing so why wouldn't it reduce the price of its own stock as well?

Perhaps, and maybe this is the real reason for the drop in price, consumers in the UK just aren't ready to pay for their mobile phone.

Many of the latest cutting-edge handsets from Nokia, Sony Ericsson and BlackBerry et al., are available as a free upgrade and many people have openly been put off by the £269 or even £329 price tag.

And as some commentators believe, those who haven't been put off by the price tag already have one suggesting that there is no other way to draw people in other than to drop the price by a massive 38%.

So will the move make people suddenly sign up? Well I suspect it will certainly draw some people in, but like any deal that is almost too good to be true, this one I feel probably is as well.

That said of course, if you are happy to get a cheap bargain then the £100 off the RRP is appealing, more so if you aren't at all fussed by 3G connectivity or more memory than the 8GB on board. Before you make the leap however, don't forget that a major announcement is expected in June that could make your brand new acquisition yesterday's technology.