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The Honolulu Advertiser
Posted on: Thursday, March 10, 2005

Motorola postpones iTunes phone debut

By Mike Hughlett
Chicago Tribune

CHICAGO — Motorola Inc. had been set to unveil today its first iTunes phone — a much-anticipated model capable of playing music bought from a popular Apple Computer Web site.

But the Schaumburg, Ill., cell phone manufacturer canceled at the last minute. And the reason speaks volumes about the balance of power between cell-phone makers and phone-service providers, a balance increasingly tilted toward the latter, analysts say.

Motorola had previewed the iTunes phone to the media earlier this week, with the intent of publicly announcing it today. Then the company got a last-minute message from a wireless carrier or carriers, and indefinitely postponed the announcement — a highly unusual occurrence.

Why would a wireless carrier have such sway with the world's second-largest cell-phone maker? Because of the unusual structure of the industry: Wireless carriers — particularly in the United States — buy phones and then often subsidize their cost to consumers.

Motorola and competitors Nokia and Sony Ericsson have all launched major forays into music, hoping music-playing phones will boom in sales like camera phones.

Motorola's initiative — first announced last summer — has gotten the most buzz because of its link with Apple's wildly successful iPod music player and the popular iTunes music site.

The iTunes phone that was to debut has a display screen akin to the iPod. It is capable of holding 25 to about 100 songs, depending on how much a buyer wants to pay for memory cards, a Motorola executive said this week.

At the top end of song storage, the first iTunes phone has about the same capacity as one variation of Apple's new iPod Shuffle MP3 player. The first iTunes phone also has a stereo headset jack and Bluetooth wireless technology.

The phone is supposed to hit the market this summer. But Motorola had planned to unveil it in conjunction with the start of CeBIT, a big technology and electronics trade show in Hanover, Germany.

The company killed the unveiling after discussions late Tuesday night with "our operators," said Monica Rohleder, a Motorola spokeswoman.

Motorola discussed "the logistics of this product with our carriers across the globe," she said. The result: "We decided to wait to announce it when everybody is in sync with it."

The announcement will come when the phone gets closer to hitting the market, Rohleder said.

Motorola hasn't said which wireless operator or operators will carry the iTunes phone. Analysts speculated the phone would be launched in Europe since it was being announced there.

If Motorola does a European launch, U.K.-based Vodafone would be a prime candidate to carry it there, analysts said. Vodafone is Europe's largest carrier and one of Motorola's biggest cell-phone customers. Vodafone couldn't be reached yesterday for comment.

Does the unveiling incident demonstrate the power of wireless carriers? "Absolutely," said Neil Strother, a wireless analyst in Seattle with market research firm In-Stat MDR.

"You don't want to make your customer mad," Strother said. "If the customer is not ready, then Motorola has to say we're not either."