The iPhone 5 is displayed during an Apple special event in San Francisco. Source: AFP
COULD the simple release of a new mobile smartphone in seven days finally convince Australian consumers to spend some money and measurably stimulate our economy?
It seems a ludicrous concept for such a small albeit expensive item but the release of the Apple iPhone 5 next Friday could conceivably be the spark that boosts not just Australian retail sales figures but our overall economic growth numbers as well.
The reasons are varied and go much wider than the simple handset itself but centre around the two main battles it will spark - phone plan wars and the accessory upgrading war.
While the new iPhone 5 with a larger screen was seen by most analysts as more of an evolution than a revolution it ushered in two very distinct and important changes - the ability to use faster 4G data services in Australia that are offered by Telstra, Optus and Virgin mobile (through a deal with Optus) and a new connector and SIM card size that will largely make past accessories obsolete or at the very least clunky and difficult to use.
The new iPhone has now become the perfect tool for Optus and Telstra to use in their increasingly strident battle to win the hearts, minds and wallets of mobile customers.
They will be bombarding all of us between now and Christmas and beyond with advertising offering the new iPhone on a variety of monthly priced plans to help Apple's plan to sell 10 million of the devices worldwide by the end of September alone, adding to a staggering 244 million iPhones sold since 2007.
And the new SIM size will help the telcos to snag customers upgrading from older phones and maturing phone contracts, making a new plan the most convenient way to upgrade phones.
That 4G compatibility is vital for Apple to keep up with competitors such as Samsung and the availability of more 4G handsets will help to accelerate the rollout of faster mobile data services, a race which Telstra is clearly winning in Australia at this stage.
Telstra is aiming to cover two-thirds of Australia's population with 4G by next year after spending an extra $500 million while Optus is also spending freely to cover all of the major capitals by early next year.
It is here that the multiplier effect of a new iPhone really starts to take place as the legion of loyal Apple fans built up since the first iPhone was launched in 2007 start to upgrade and a new crop of admirers snap up cheaper previous models.
Not only is the monthly plan a significantly greater amount than the handset itself would cost to buy, data usage over the 4G network will increase markedly.
Faster speeds always lead to more data usage and increasingly data is where the big telcos make their revenue as mobile calls and messages become almost a secondary part of the smartphone revolution.
It rarely pays to underestimate how quickly a new technology can infiltrate the mobile phone space and it would not be a massive surprise if data-hungry 4G enabled phones dominated mobile customer accounts with the big telcos in a couple of years.
A secondary part of the revenue boost from the faster smartphone revolution is the variety of economic activity that can be stimulated through this channel as consumers buy or trade literally anything on their devices as well as spending on applications, music, games and video entertainment.
The second major economic boost from the new iPhone centres around new accessories the phone will need, courtesy of the decision to change the connector cable for the iPhone 5.
Accessory makers around the world have been celebrating and preparing for this decision because they get to make a whole range of new products that will interface with the new phone, given that the old connector has been an Apple standard for almost a decade.
And that is no small beer when you add up the variety of items it could include from stereos and clock radios all the way through to computer connectors and car chargers.
An adaptor to bridge between the old and new connectors will be available but the convenience factor of slotting the new phone in a cradle will see a massive amount of upgrading and a slew of second-hand sales through the market.
If you think it is an exaggeration to say that a new phone could boost Australia's economy, some groundbreaking research by JP Morgan analyst Michael Faroli suggests that previous releases of Apple iPhones have already had a measurable effect on sales figures and the economic growth rate of the much larger US economy.
He forecasts that the release of this phone with projected sales this year of eight million units in the US alone and a healthy trade profit margin of $400 a unit could add between 0.25 per cent and 0.5 per cent of annualised GDP growth to the US. That is the equivalent of more than $3 billion in that quarter or $12.3 billion annualised, which is not to be sneezed at.
For those forecasts to hold up, the buyers must spend money on phones that they would not have otherwise spent but here in cashed-up but retail averse Australia, that is not such a hard thing to believe.
So cheer up next time you see a crowd of people all listening, talking or watching their shiny new model smartphone - that constant drip feed of monthly payments and data charges they are paying is one important ingredient keeping Australia's 21-year record of positive economic growth intact at a time when other sources have run dry.
YESTERDAY'S dramatic, almost 14 per cent slump in the value of Fortescue Metals shares shows the drastic impact debt can have on a company.
On the way up when the iron ore price was rocketing and Fortescue was borrowing heavily to build infrastructure, that extra debt on the balance sheet was providing valuable leverage to the iron ore price for investors.
Now that the iron ore spot price has cracked and become highly volatile, that $9 billion of gross debt is like a dangerous millstone around Fortescue's neck.
Fortescue last night confirmed it is asking lenders to waive debt covenants before the next review deadline for December 31 this year, which now looms as a D-day for the company.
Fortescue's future now lies with negotiations with its "supportive banking group" and an improvement in the iron ore price.
That second lever is not within management's control and will depend on the success of measures such as the Chinese stimulus packages and the economic health of Europe and the US which are China's main export markets.
At certain points in the economic cycle lots of debt is a big advantage but for Fortescue at the moment, it has become a vortex which threatens to vacuum up a lot of available cash flow and if lenders don't come to the party, the current ownership of Fortescue's assets.
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