The iPhone makes its debut in the Gulf – but high pricing and lack of support for Arabic text might hold it back

Posted by Matthew Reed Tuesday, March 3rd, 2009

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Etisalat launched the iPhone 3G in the UAE and in Saudi Arabia in the last week of February. The official release of the iconic device could help raise data traffic and revenues in the region, which are still low by international standards. But the impact of the iPhone could be constrained by two factors: the fact that subscribers have to pay the high cost of the device upfront if they want to get the better-value plans, and the fact that the iPhone does not enable users to read or write text in Arabic.

In the UAE, Etisalat is offering the iPhone 3G through eight price plans – four for the 8GB model and four for the 16GB. All are postpaid. Subscribers on Plan 1 for the 8GB iPhone are charged AED2,646 (US$719) for the device, plus AED199 a month for a 12-month contract that includes 125 national voice minutes, 125 national SMSes and 500MB of data usage a month. For Plans 2, 3 and 4, the cost of the device falls but the monthly fee rises, as do the voice, SMS and data allocations. With Plan 4 for the 8GB model, the device is free and the monthly fee is AED643, for 500 voice minutes, 300 SMSes and 2GB of data a month.

Etisalat’s price plans for the 16GB model follow a similar pattern. With Plan 1, the device costs AED3,090 plus AED199 a month for 12 months. With Plan 4, the device costs AED375 plus AED643 a month.

In Plan 1, for both the 8GB and 16GB, Etisalat is essentially charging full price for the handsets, the same or slightly more than the cost of unauthorized – or “gray market” – iPhone 3G handsets from retailers in UAE shopping malls, which come in at about AED2,500 for the 8GB model and AED3,000 for the 16GB. With Plans 2, 3 and 4, Etisalat is subsidizing the cost of the device to some degree – entirely, in the case of 8GB Plan 4.

By comparison, AT&T in the US charges US$199 for the 8GB iPhone 3G, with a two-year contract. Monthly packages of data, talk time and SMSes start at about US$74.99. On that basis, the total cost with AT&T in the first year is US$1,099; over two years it is US$1,999.

But since Gulf subscribers are accustomed to paying full price for their handsets, they might not flinch at what Etisalat is charging under Plan 1 for both the 8GB and 16GB devices. Operators in the Gulf generally do not sell handsets directly or subsidize them. Instead, subscribers in the Gulf usually buy their handsets from independent retailers, paying full price. Other than the iPhone, the few exceptions are the BlackBerry and USB modems and data cards, which Etisalat also sells directly to customers.
And the full-price iPhone plans from Etisalat offer much better value for money for the subscriber than the plans in which the device is subsidized. Etisalat stands to earn total revenues in the first year of US$1,371 from a subscriber who pays full price for the 8GB iPhone through Plan 1. Over two years, Etisalat would earn US$2,021.

But Etisalat would earn the much higher sums of US$2,101 in the first year and US$4,202 over two years from a subscriber opting for the full subsidy for the 8GB iPhone through Plan 4 (though Plan 4 does offer the user more inclusive minutes, SMSes and data).

prices for the iPhone in the UAE are still higher than those of other operators in the region. In Saudi Arabia, the iPhone packages of Etisalat affiliate Mobily cost slightly less, though Mobily’s voice-minute, SMS and data bundles are smaller. Mobily’s 8GB Postpaid 99 tariff costs SAR2,255 (US$602) for the 8GB iPhone plus SAR99 a month for 75 minutes, 75 SMSes and 200MB of data, with a 12-month contract.

Orange Jordan is offering the iPhone at prices starting at JOD200 (US$422) for the 8GB handset plus a monthly fee of JOD29.99. But in Egypt, Mobinil is offering the 8GB iPhone at the relatively high price of E£3,800 (US$677).

Reports from Saudi Arabia have said that initial demand for the iPhone there had been strong, with more than 25,000 iPhone subscriptions recorded on the day of its launch by Mobily.

But the take-up of the iPhone in the region could be constrained by the fact that the device does not properly display Arabic text messages or web pages, or enable users to type in Arabic – to send text messages, for example. Arabic letters have a different form depending on whether they appear at the beginning, middle or end of a word, and Apple’s software is not able to render the letters correctly. The iPhone enables users to read and write in about 18 other languages.

There are third-party applications and software that help iPhone users use Arabic text, but they are not yet perfected. It is a shortcoming that could hold the iPhone back, particularly in markets such as Saudi Arabia. But a Mobily spokesman has reportedly said that the problem would be addressed within the next few months.