Apple targets mass market with cheaper 3G iPhone

Apple unveiled its next-generation iPhone, which promises GPS and faster Internet running on third generation networks - and will sell for as little as £100 in the UK.

Chief executive Steve Jobs indicated the company was going after the mass market with the new model.

The new phone also marks a significant departure for how Apple will make money in its third major business, alongside Macintosh computers and iPod media players.

Wireless network companies will no longer pay Apple part of the subscription fees they get from iPhone users, but instead will subsidise the devices up front to make them cheaper.

"The vast majority of agreements we have reached do not have those follow-on payments, so you can conclude that the vast majority of carriers do provide subsidies for the phone," said Tim Cook, Apple's chief operating officer.

Cook declined to comment on how the new arrangement would affect Apple's profit margins, but AT&T, the exclusive US carrier for the iPhone, said the subsidy would hurt its earnings and margins through next year.

Improved email features for the iPhone are intended to woo business people, while its ability to run on faster networks is key to Apple's push to gain market share in Europe and Asia.

The new model, which looks similar to the old model but with glossy black or white plastic in place of a metal back cover, loads Internet pages some 2.8 times faster than the original, he said.

In the US, an entry-level version of the new iPhone, with 8GB of memory, will cost $199, versus $399 for the older iPhone with similar memory. A version of the new one with twice the memory will cost $299.

The new phones will go on sale on 11 July in 22 countries and regions, expanding to 70 by the end of the year.

As for China, the biggest mobile phone market in the world and one where Apple does not have a deal to sell iPhones, Cook said the company would get there "over time", and CNBC quoted Jobs as saying Apple hoped to be there later this year.

The new iPhone will run on third-generation (3G) wireless networks and includes satellite navigation capability, Jobs told developers at a conference in San Francisco.

A new service, "MobileMe," will automatically send email and other information to iPhones, similar to Microsoft Corp's Exchange email server product. The pay service will replace Apple's .Mac service and offer Web applications intended to make the phone work more like a desktop computer.

Jobs said Apple has sold six million iPhones so far, and Cook said he was "still very comfortable" that the company would hit its goal of selling ten million units by the end of 2008.

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