O2: Apple to blame for UK iPhone 3G S prices

By David Meyer on 11 June 2009, 6:18pm

Apple's pricing strategy is behind the eye-watering UK cost of an iPhone 3G S, according to O2.

On Wednesday, the operator said Apple is charging it the same price for this year's mid-range model as it did for last year's top-end handset.

O2's comments come after CNET UK's sharp-eyed sister site ZDNet UK pointed out that at launch, the cost of the new mid-range iPhone (which comes with 16GB of storage) was 87 per cent more than the cost of last year's (which came with 8GB). Similarly, the new top-end iPhone (with 32GB) costs 72 per cent more than last year's model (with 16GB). This year's low-end iPhone is last year's top-end model.

O2 defended its price structure, however, saying it reflected the costs charged by Apple. "We have not raised the prices of the device," a spokesman for the mobile operator told ZDNet UK. "They are in line with last year's pricing, because the wholesale price we pay has not changed."

Apple's UK wholesale price for the midrange 16GB 3G S is the same as it charged last year for the top-end 16GB 3G, the O2 spokesman said.

While prices have increased for the mid-range and top-end iPhone in the UK, they have remained the same for customers of AT&T, the exclusive carrier of the handset in the US. There, the 32GB iPhone 3G S costs $299 (£180), the same price as its counterpart 16GB iPhone 3G from last year. The 16GB iPhone 3G S is $199 (£120), the same as last year's 8GB iPhone 3G.

O2 would not comment on the difference in Apple's wholesale prices between a 16GB and 32GB iPhone 3G S. In retail prices, on a SIM-free basis, the difference is just under £100.

Apple did not respond to requests for comment on its wholesale prices in the UK and the US by time of publication.

O2 provides a cheaper deal on the iPhone than its US counterpart, according to the company's spokesman. He said a 16GB iPhone 3G S would cost $199, plus sales tax, for a customer on a 24-month, $70-per-month AT&T contract. The same handset would be free on a £45-per-month O2 contract of the same duration. At current exchange rates, £45 translates to around $74.

"AT&T may have reduced the price of the models, but we still offer a better-value deal in the UK," O2's spokesman said.

The iPhone 3G S range will go on sale in the UK on 19 June. Aside from the storage upgrade, other enhancements include the addition of video capture and a built-in compass.

Update: A previous version of this story stated that the wholesale price of this year's top-end 32GB 3G S was the same at that of last year's top-end 16GB 3G. This paragraph has been removed after clarification from O2.