Rogers's iPhone a warning to new carriers, analysts say

Rogers Communications has fired a warning shot at potential new wireless carriers by announcing it will offer Apple's sought-after iPhone this year.

Lack of details also seen as indicator that faster device is imminent

Rogers Communications Inc. has fired a warning shot at potential new wireless carriers and indicated that a faster version of the iPhone is imminent by announcing it will offer Apple Inc.'s sought-after device later this year, according to analysts.

The country's largest wireless carrier, with 7.3 million customers, on Tuesday announced it would finally bring Apple's iPhone to Canada sometime this year, but declined to provide further details, including pricing or a release date.

"We're thrilled to announce that we have a deal with Apple to bring the iPhone to Canada later this year," said president Ted Rogers in a terse statement. "We can't tell you any more about it right now, but stay tuned."

The lack of details was unusual, since announcements by carriers in other countries have included pricing and release dates. Aside from the United States, where the iPhone is sold by AT&T, the device is available in Britain and Ireland through O2, in France through Orange, and in Germany and Austria through T-Mobile.

Analysts said Rogers's announcement, made in conjunction with its first-quarter earnings report, was strategic in that a government auction of cellphone airwaves is scheduled to begin in about a month. Since the iPhone first launched in the United States almost a year ago, Rogers has been the only possible Canadian carrier for the device because it has the only compatible network.

The company has thus had the luxury of time to hammer out a favourable deal with Apple. But that advantage, analysts say, is about to end because the spectrum auction will result in new cellphone carriers starting up. The winners of the auction should be known by the time Rogers announces its second-quarter earnings three months from now.

New entrants are likely to build networks similar to those of Rogers, which means the existing one-horse race for the iPhone would soon have more competitors.

"They want to take this out of the hands of a new entrant in the spectrum auction," said Lawrence Surtees, telecommunications analyst for technology research firm IDC Canada. "They're going to bring this out just as the [new entrants are] about to start business in order to frag them."

The iPhone has won accolades — Time magazine named it the Invention of the Year for 2007 — for its touch screen and for bringing the internet surfing experience of a desktop computer to the cellphone. The device, which has sold five million units in less than a year, has also spurred sales of other smart phones such as Research In Motion Ltd.'s BlackBerry.

Thousands of iPhones are already in Canada, but these have been imported from the United States and unlocked to unofficially work on Rogers's network.

IPhone will force Rogers to overhaul data rates: analyst

Rogers has taken its time in coming to an official agreement with Apple because the carrier will need to drastically overhaul its data rates if it is to introduce the iPhone, which stresses mobile internet usage rather than simple voice calls, Surtees said. Apple has been insisting that iPhone carriers offer customers reasonable data rates so they can get a full mobile internet experience, something Rogers has been loathe to do.

"Would Ted be in a hurry to [introduce lower data rates] without the newcomers? No," he said. "If a competitor were to be licensed this month, the iPhone would be here today.... They're not prepared to cannibalize their revenue just yet."

Other analysts said the lack of details in Rogers's announcement indicated that Apple is about to make an announcement on a newer, faster model of the iPhone.

One of the chief criticisms of the device thus far has been that its downloading rate is too slow. As a result, rumours have swirled recently that Apple is due to unveil an iPhone that runs on faster 3G networks, possibly in June or July.

Waiting for the newer faster version will allow Rogers to sidestep criticisms of its data rates, said Iain Grant, president of telecommunications consultancy The Seaboard Group.

"That's how you stay away from questions like, 'What's taken you so long?,'" he said.

Rogers and Apple also have to contend with a trademark dispute from Comwave, a small Toronto-based telecommunications company. Comwave sells its own iPhone, a Voice Over Internet Protocol land line, and has laid claim to the name.

John Clifford, a competition lawyer for McMillan Binch Mendelsohn in Toronto, said the dispute with Comwave is unlikely to hold up the introduction of the Apple iPhone, but will likely come down to the company paying Comwave to put the matter to rest.

"If they've got a trademark for that phone, I don't see how Apple can claim it has any prior rights to the word 'iPhone,'" he said. "The only way for Apple to be able to use the iPhone trademark in Canada is to make a deal with them, to buy it."

Industry observers expect Rogers to get a big boost from the iPhone.

RBC Capital Markets analyst Jonathan Allen expects Rogers's monthly prices will be somewhat higher than those offered by AT&T in the United States. In a recent note to clients, Allen said he expects Rogers to charge between $80 to $100 a month versus AT&T's $60 to $80.

Kaan Yigit, president of consumer electronics tracking firm Solutions Research Group, said Rogers is likely to offer both the older iPhone and the faster, third-generation — or 3G — device when it is launched.

"I would be surprised if they did offer only the 3G version," he said. "The price point would be at the top end and Canadian wireless users are more price sensitive, so I suspect you would see the [older] version, which will be more discounted of course, and 3G eventually to provide a price/package choice."

The average Canadian iPhone buyer will be male, 29 years old and have a household income 42 per cent higher than the national average, Solutions Research Group said in a study released Tuesday.

Rogers's shares benefited from the iPhone announcement, rising $1.60 to $44.50 — or almost four per cent — on the Toronto Stock Exchange.