iPhone - a first

In a bid to offer better experiences to customers, we entered into an exclusive agreement to market Apple’s iPhone. The device is the first ‘convergence’ product on the UK market – combining phone, camera/video and music player with mobile web browsing, one-click access to the internet, flat rate tariffs, and Wi-Fi access at over 7,500 public hotspots.

The launch comes at a tipping point for mobile internet – we are seeing a change in the industry with mobile internet services starting to take off.  We expect the iPhone to become an important part of our portfolio but only one of a wide range of handsets to meet our customers’ needs.

During the year we were held to account by some stakeholders for the cost of the iPhone, priced at £269 plus an 18-month contract starting at £35 per month. We refreshed our tariff structure in February 2008 adding more minutes and texts to the iPhone tariffs.  We believe that today’s customers are comfortable paying for some high end devices. With its unique multi-task features from a single device, we feel the iPhone is good value.

The device, amongst other new services, helped us connect nearly 500,000 additional customers in the fourth quarter of 2007 (276,000 of them on contracts).

To ensure high levels of service, we boosted employee numbers by 1,427 to support the iPhone launch. O2 and Carphone Warehouse stores offer live demonstrations and a dedicated specialist to help customers. Employees are trained to advise on setting up personal email and downloading songs via iTunes Wi-Fi, for example.