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Last Updated: Wednesday, 19 September 2007, 09:23 GMT 10:23 UK
iPhone wedding gets mixed reception
By Rory Cellan-Jones
Technology correspondent, BBC News

As Apple's Steve Jobs unveiled the UK deal for the iPhone with his usual showmanship, O2's Matthew Key and Charles Dunstone of Carphone Warehouse looked on like blushing brides.

Apple's iPhone at its London launch
How much convenience will the iPhone marriage offer?

Indeed, it was Mr Jobs who was keen to push the marriage metaphor when he described the courtship process with the different UK networks, which ended with O2 winning the contract.

"We dated a few people who we didn't get married to," he said. "So there are a few unhappy girlfriends out there."

But what does this marriage mean for the UK mobile phone market? Will customers really want to pay what Apple and O2 are going to charge the iPhone's early adopters?

And given the high price that the network and its customers will face, will the iPhone prove such a great deal?

The O2 website crashed soon after the iPhone announcement, apparently gasping under the weight of inquiries from excited customers.

They may be a little more cautious once they look more closely at the price - 269 is pretty steep these days for a mobile phone, when a lot of handsets are handed over for nothing to customers who sign up to a monthly contract.

But the cost of ownership doesn't stop there. The iPhone's users will have to sign up for an 18-month contract, at a minimum price of 35 a month.

If you want a bigger package, with 1,200 minutes of calls and 500 texts, you will pay 55 a month.

Over the 18-month contract, that adds up a grand total of 1,259. You do, though, get free access to 7,500 wi-fi hotspots across the UK.

Nokia vs 'i-factor'

But just look at another phone offered by O2 and Carphone Warehouse. The N95 is Nokia's big hit of recent months and, in technical terms, it is more advanced than its new Apple rival.

It has a five-megapixel camera, compared with the two-megapixel version on the iPhone. It is 3G, which means it will provide far superior surfing speeds to those on the iPhone, and it has GPS, which should make it easier to navigate with Nokia than with Apple.

On some websites you have to pay 279.99 for it with the 35-a-month contract - but the 50 tariff gives you the handset for free and offers just as many minutes and texts as the iPhone's most expensive contract.

Nokia's N95 phone
Nokia's N95 has a five-megapixel camera

So at a total cost of 900 for 18 months, the N95 is substantially cheaper than the iPhone.

And if you get the N95 from O2 direct, the phone is thrown in for free if you take out a 35-a-month contract for 18 month - or just 630.

Of course, what I am leaving out is the i-factor - that Apple design flair and sheer useability which made the iPod such a big hit and has created such a buzz around the phone.

But Nokia - and O2's rival networks - are bound to hit back with keen prices and new handsets as the Christmas sales battle gets under way.

Already Vodafone, which many thought would win the iPhone contract, has signed a deal to offer the MusicStation subscription download service on its handsets as an alternative to iTunes.

O2 fought very hard to win the hand of Apple and will now have to hand over a sizeable chunk of its iPhone revenue, though both sides are being coy about the details.

But the network, now owned by Spain's Telefonica, believes that Steve Jobs' "magical" handset will win it many new customers from its rivals. And judging by what happened to its website this morning, it may just be right.

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