Apple Watch cellular functionality to have low reach

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Although the big selling point of Apple’s newly-announced Apple Watch Series 3 is its cellular connectivity, Canalys has noted that this functionality will launch with a limited addressable market.

The Apple Watch 3 – announced earlier this month along side the new iPhone 8, iPhone 8 Plus and iPhone X smartphones – will have an integrated eSIM to support both LTE and UMTS connectivity.

But in a research note, Canalys said this functionality will only be supported by 14 mobile operators across eight countries at launch, and buyers will not have their choice of carrier as is the case with cellular-equipped iPads.

Instead Apple Watch’s cellular functionality requires a companion iPhone, and that iPhone must be using a postpaid SIM from an eligible operator.

In addition, in the important Chinese market, the functionality will initially be limited to just five regions not including Beijing.

“The total iPhone installed base currently sits at around 517 million. Of those, only 164 million are the right iPhones, with the right carrier, on the right tariff to work with the new cellular Apple Watch at launch,” Canalys analyst Ben Stanton said. This means 68% of iPhone owners will be uable to use the new device’s best feature.

“Apple’s potential buyers are spread across eligible and ineligible operators and contracts, and many will be disappointed. Apple needs to exert pressure on more carriers to make the required network investment before the buzz around its new product dies down.”

Canalys did note that another six operators are lined up to offer Apple Watch cellular functionality soon, which would increase Apple’s addressable market to 47% of its total iPhone installed base, but the company is yet to specify when these operators will become eligible.

“There will be some churn as loyal Apple fans switch operators to unlock the full potential of the Series 3, but customers in long-term postpaid deals with ineligible carriers often cannot do this without incurring a financial penalty,” Canalys analyst Jason Low said.

“This will be a major barrier to early adoption of the Apple Watch Series 3. But eligible operators do have an opportunity to grow their sales of Apple Watches against retailers and Apple direct channels.”


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