Vodafone Partnering With Handset Manufacturers

The launch of Vodafone 360 shows that VOD still wants to partner with handset manufacturers. With RIM reporting a lower ASP, handset manufacturers will be eager for a carrier partner that adds value to sustain prices and product life cycles.

Vodafone makes a positive relationship play with handset manufacturers by placing the Vodafone 360 into a layer on top of the OS and not an app. And the initial launch is not white label, but with Samsung and Nokia. Vodafone is not threatening handset manufacturer’s entry into services, but better focusing on its core business of communications. Vodafone’s Live!Services shifts to an emphasis on social networking and Web 2.0 integration. The capability to synchronize Facebook from mobile handset to computers is good partnering of carrier and manufacturer like Apple iTunes and AT&T.    

The just-reported fiscal second quarter for RIM shows the decline of average selling prices (ASP) for handset manufacturers, even at higher-end smartphones.  RIM is forecasting an ASP of $320 for its third quarter, down from $345 in this last quarter and $357 in the prior quarter. The $320 ASP is still respectable, but the problem is that its top-selling Curve model is selling at $50 across the top four U.S. carriers and in Wal-Mart and Best Buy.  Also, Verizon cleared out RIM’s Storm model at $50 from its initial $199 price. The Palm Pre was short-lived at $199 as Sprint lowered the price to $149 and offered a $100 service credit.  It is unlikely that carriers can continue handset subsidies of $100 to $200 in addition to other acquisition costs. And manufacturers cannot sell at low prices and have short life cycles. RIM reported R&D was up 30% and sales/marketing increased by 13% from a year ago. Vodafone might have a business model of using the 360 service to add value, hold price and lengthen the life cycle to handsets while generating network revenue.