Apple's iPhone: Calling Europe or Europe Calling

Apple needs little introduction. After the launch of the highly successful iPod in 2001, Apple has been on an aggressive growth path (revenues have increased by a compound annual growth rate (CAGR) of 31 % and net income surged ahead at a CAGR of 128 %). In 2007, Apple declared that they would once change yet another industry - mobile telephony - with the iPhone. The iPhone was heralded as an immediate success in the U.S. selling one million units in a record 74 days (the iPod took two years to reach the million unit mark). Apart from the high sales and the positive technological reviews, what surprised many was the revenue sharing model that Apple had negotiated with mobile carriers, who had traditionally not given up a part of their subscription revenues to handset manufacturers. The case is set as of Nov. 9, 2007 on the morning that the iPhone is released in the UK with Telefonica's O2. Students must determine whether the deal will prove advantageous to Telefonica's O2 and the longer-term affects on the industry structure. This case won the "2008 ECCH Case Awards" in the category "Knowledge, Information & Communication Systems Management".