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O2 blames Apple for UK iPhone 3G S prices

Apple is charging O2 the same wholesale rate for this year's mid-range iPhone as it did for last year's top-end model, the operator has said
Written by David Meyer, Contributor

Apple's pricing strategy is behind the 87 percent increase in the cost of a mid-range iPhone in the UK, according to O2.

On Wednesday, the operator, which is the exclusive carrier of the iPhone in the UK, 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 ZDNet UK pointed out that at launch, the cost of the new mid-range iPhone (which comes with 16GB of storage) was 87 percent more than the cost of last year's (which came with 8GB). Similarly, the new top-end iPhone (with 32GB) costs 72 percent more than last year's model (with 16GB).

However, O2 defended its price structure, 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, 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.

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