More iPhone Math

Stunningly weak iPhone activation numbers from Germany's T-Mobile casts further doubt on iPhone's prospects in Europe in 2008. Rapid arrival of the 3G version with improved camera specs and possible GPS is now vitally important if Apple (AAPL - commentary - Cramer's Take) wants to get a real toehold in Europe.

Icy Europe

A couple of months ago, there was feverish speculation about whether the British operator O2 might get 400,000 iPhone subscribers in the fourth quarter of 2007. In the end, it took until January 2008 before O2 announced 200,000 iPhone activations. After the French operator Orange announced it had only sold 70,000 iPhones by Jan. 10, estimates for European iPhone sales for the fourth quarter 2007 started moving to the 350,000-400,000 range

Over the weekend, Germany's T-Mobile dropped a bombshell -- it has amassed only 70,000 iPhone subscribers in the 11 weeks the phone has been available. Could there be a massive amount of unlocked iPhones selling in Germany and other European countries? Well, no. T-Mobile is charging more than $1,400 for an unlocked iPhone, so it's hard to see that this avenue could be all that meaningful.

Why is the T-Mobile number such a shocker? T-Mobile had more than 34 million subscribers when it debuted the iPhone. AT&T (T - commentary - Cramer's Take) had more than 63 million when it launched the device at the end of the second quarter 2007 and proceeded to activate more than 140,000 iPhone subscribers in a day and a half. T-Mobile's sub base is more than half of AT&T's; a direct comparison to AT&T is valid.

It now looks like the true number of European unit sales of the iPhone in the fourth quarter is probably closer to 300,000 than 350,000 -- possibly even below 300,000. The key question here is why the German number is so much weaker than expected when the British operator O2 seems to have activated more than 150,000 units in the quarter. One possible explanation is that the high-end handset competition got remarkably tough during December 2008 and onward, and German consumers are notorious for chasing the best available specifications.

The first-generation iPhone lacks 3G support and packs a meager 2-megapixel camera with a cheap lens. In comparison, LG's iPhone-lookalike called KU 990 features a 5-megapixel camera, 3.6-Mbps mobile data speeds over W-CDMA networks and a petite 112-gram weight.

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At time of publication, Kuittinen had no positions in the stocks mentioned, although holdings can change at any time.

Tero Kuittinen is managing director and senior analyst for Avian Securities, a brokerage firm specializing in technology companies. Although Kuittinen is an employee of Avian Securities the statements above are being made in Kuittinen's personal capacity and are in no way are the statements of Avian Securities, nor attributable to the company. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Kuittinen appreciates your feedback; click here to send an email.