O2's smartphone gamble

08-07-2009

by Ralph Averbuch

Will O2's deal to sell Palm's Pre make money or just prevent customer churn?

So it seems that the Palm Pre will come to Ireland (and the UK and Germany) "in time for Christmas". That's nice. But perhaps the odd turn of events is the fact that the carrier will be O2. Now to some this might seem just a little surprising, given that O2 is also the current home of Apple's iPhone. For one, Apple knows perfectly well that the Palm Pre is all about stealing the iPhone's thunder, yet here at least, the same carrier will be trying to sell you either or perhaps both devices! The point is, it seems distinctly counter-intuitive for Palm to have cut a deal with O2, when it could have so easily gone to Vodafone, whose current selection of bleeding edge smartphones is basically tied to the latest offerings from Blackberry or the Nokia N97. But if you dig a little deeper perhaps it's not so crazy. After all, O2 is now well versed in selling leading edge smartphones - one of the few sectors in mobile telecoms which is enjoying growth. People are either not upgrading or are going up-market into smartphone territory. That's good for O2 as it's already captured many of the early adopters with the iPhone. It may be that Palm believes its best chance of success lies in piggybacking off this experience, so when someone comes to buy a new phone it's now a head-to-head between two of the most talked-about handsets of the moment. The question is can O2 generate new contracts when the Pre comes out or will it simply end up churning its existing customers, keen to use this latest device? But perhaps that doesn't matter... just so long as those early adopters aren't bleeding away to competitor carriers.

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