New iPhone likely as O2 and T-Mobile slash prices

March 16th, 2009 by Peter

The hottest smartphones could be coming to UK users at rockbottom prices from May, with O2 set to slash the cost of owning a 16Gb iPhone 3G, reportedly in advance of a new iPhone launch, and T-Mobile doing the same for the G1.

It looks increasingly likely that Apple will release an upgraded iPhone 3G this June or July in the UK, but it is still very unclear what this will look like. The pundits are split between those who expect a ’superphone’ to fend off the Palm Pre, LG Arena and others – with heavyweight memory, video, camera and other features where the iPhone has lagged behind the big hitters of the smartphone market; plus enhancements to the browser, widgets and multitouch experience.

After all, Apple’s place at the top of the multitouch pile, which has been proven to drive mobile web usage, is now threatened by Palm, LG and others, and even the lawsuits that Apple is said to be preparing won’t stop the challengers if users take to their upgrades.

But most major players, like the Android community and Nokia, are still lagging behind on multitouch and other important user interface features, and so other commentators think Apple will stick with its advantage at the high end and focus on a whole new format for the iPhone to increase its appeal to the midrange mobile web users and those feeling the credit crunch.

This could be then, the long rumored iPhone Nano, which was even pre-emptively cloned early this year, but never materialized for real. This would be small and slim, as it name suggests, but would come with less memory, screen size, presumably camera Megapixels and so on than its big brother.

This could extend the iPhone’s overall reach and prolong the life of the larger devices, but would do less to explain the price cutting at O2 and also at Austria’s iPhone carrier, T-Mobile. And since at least some of the iPhone’s success comes from its appeal as a multifunctional product – replacing music players and even notebooks for some users – it might defy the downturn more effectively by packing in new features rather than cutting them down, bringing the iPhone head-to-head with Android, which will see a host of new handsets in the second half of the year, targeted at every segment of the user base.

So just how cheap will a current iPhone model come, if O2 implements the reported price cuts from next month, to clear its shelves for new models – and boost volumes, giving it a better chance of keeping its exclusive deal for another year. According to Mobile Today, the current iPhone is 100% subsidized for customers taking out a tariff of at least £75 per month, while those taking out £35 or £45 monthly plans must pay between £59 and £159. From May, O2 will reportedly offer the iPhone free with any tariff above £35.

But despite O2’s best efforts, its exclusive may not cover the new model. Sources say that Orange – which lost its French exclusive after a legal challenge – is talking to Apple about being able to offer the new iPhone in the UK, alongside O2. Orange currently sells the iPhone in 27 countries, including France.

One aspect of any new iPhones, the software, will become clearer tomorrow when Apple hosts a briefing on release 3.0 of the platform, plus a new software development kit. AT&T carried out a user survey last year to see which features customers wanted for the 3G iPhone, and some of these may be included in the new release. Prominent among them is cut and paste capability, while many are also hoping for true background processing – Apple had promised a feature that would support a quasi-version of this feature, but it never appeared, sparking speculation that Apple was readying the real thing.

Meanwhile, T-Mobile is promising major firmware updates for the G1 Android-based phone, including virtual keyboards and stereo Bluetooth support, plus an upgrade of the underlying Linux kernel. Stealing a march on Apple, it will introduce cut and paste to the browser as well as supporting the latest iteration of the Webkit browser core, and adding support for the new Squirrelfish Javascript engine. The updates, which will be available next month, are based on the ‘Cupcake’ changes to Android, which Google outlined last autumn, and which are now joining the mainstream Android platform.

A host of new Android products will appear in the second half of the year, but once again these are led by HTC, with Vodafone launching the Magic in the UK and other places from next month, and T-Mobile going with the upgraded G1. In preparation for this, T-Mobile USA recently cut G1 pricing and is likely to do the same in the UK soon. Last week, US wholesaler Costco cut the cost of the black G1 by $100 to just $79.99 with a new or upgraded two-year contract of $24.99 or more; and retailer Amazon also reduced its price tag on G1 to $98 with contract, or $399.99 unlocked.

T-Mobile offers a range of tariffs for the handset in the UK, the lowest being the 18-month Combi 20 contract, where the phone is free with a monthly spend of at least £48.92. T-Mobile will be looking to steal thunder from the Vodafone Magic launch with its lower cost Androids, as it waits for ‘G2′.