‘iPhone set to struggle’

Apple's much-anticipated iPhone, which goes on sale in the US today, will struggle to break into the mainstream because of a lack of a 3G connection and low demand for converged devices, according to research.

International research conducted by media agency Universal McCann has concluded that Apple's goal of selling 10m iPhones by the end of 2008 is too ambitious.

Apple's iPhone combines a phone, music and video player with web and email capabilities, but researchers found demand for these converged devices was lowest in affluent countries.

Only 31% of Americans surveyed said they wanted a device with multiple capabilities, and that dropped to 27% in Japan.

Demand was highest in Mexico, where 79% said they would like one converged device, with 72% in Malaysia and Brazil, 70% in India and 65% in the Philippines, although the mobile markets in these countries are driven by very cheap or free handsets.

In the US, 60% of mobile phone users already own three or more specialist devices such as digital cameras, MP3 players and portable media devices.

The iPhone goes on sale across the US today from 6pm today, with Apple stores staying open until midnight. iPhone workshops will be on offer at stores tomorrow morning.

The iPhone is available on a two-year contract with US mobile operator AT&T. The handsets cost $499 (£249) for a 4GB version and $599 (£299) for 8GB. Call tariffs are between $60 (£29.90) and $100 (£49.90).

Apple has not yet announced the European release date for the iPhone announced but a spokesman said it would be in late 2007.

Vodafone, the world's largest mobile operator, was recently rumoured to be the preferred carrier for Europe.

Reviews of the iPhone by the New York Times and Wall Street Journal have been favourable, praising the quality of the large touchscreen for video, although the quality and speed of AT&T's network has been questioned.

The Apple chief executive, Steve Jobs, this week told USA Today that moving into the mobile market would not change the company.

"We've got two strong legs on our chair today - we have the Mac business, which is a $10bn business, and music, our iPod and iTunes business, which is $10bn. We hope the iPhone is the third leg on our chair, and maybe one day Apple TV will be the fourth leg," Mr Jobs said.

Apple's sales target of 10m handsets is equivalent to 1% of the global mobile market and would generate around $5bn (£2.49bn) in revenue.

Report author Tom Smith, Universal McCann's research manager for Europe, the Middle East and Asia, said the trend for multiple devices were a serious barrier for converged devices because users would not be motivated to replace their existing gadgets.

"The simple truth: convergence is a compromise driven by financial limitations, not aspiration. In the markets where multiple devices are affordable, the vast majority would prefer that to one device fits all," Mr Smith added.

Universal McCann's report goes on to say that the lack of a 3G connection in the iPhone, which supports faster data speeds, goes against the trend of 3G driving mobile uptake in key markets, particularly Asia.

The survey of 10,000 people found that on average 43% wanted to use a 3G device, demonstrating a higher demand than for iPods, laptops and other media players. In China that figure rose to 72%, and in Malaysia it was 67%.

Across the whole survey, 33% also said they wanted live TV on their mobile, which requires a 3G connection.

However, email and office software, which are core offerings of the iPhone, were ranked as important by those surveyed, with one third of people expressing an interest.

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