Telefonica (TEF) has announced that it will sell Amazon Inc.’s (AMZN) much-hyped Fire phone in the U.K. under its flagship brand O2. The smartphone’s arrival in Europe comes soon after Amazon slashed its price in the U.S. by almost $200.

The Fire phone is already available for pre-orders in the U.K. from O2’s website and will be shipped on and from Sep 30, 2014. O2 customers signing up for a two-year £33 per month ($53 per month) contract will not have to pay any upfront fee. Meanwhile, customers in Germany can acquire the smartphone via Deutsche Telekom’s network at an upfront fee of €1 ($1.3). Shipping for German customers will also begin from Sep 30.

Amazon launched the Fire phone in June and initiated sale in the U.S. in July under a two-year exclusive contract with AT&T Inc. (T). The customized Android-based smartphone sports a 4.7 inch display, a 13 MP camera and a quad core processor.

The phone also includes a gesture-based interface called Firefly, which uses the camera to scan barcodes or recognize phone numbers, book covers, addresses and other real-world details, thus making it easier for customers to get prompt information and take quick actions.

Despite such strong features, the phone had so far failed to live up to its expectation. This induced the need for a drastic slash in prices. The no-contract price tag was also reduced from $649 to $449.

The smartphone is bundled with unlimited cloud storage for photos. Moreover, O2 customers buying the Fire phone will get a free one-year membership to Amazon Prime, which will offer access to its Kindle e-book lending library and also provide free shipping of select products sold under Amazon.com.

We believe the no upfront fee scheme will definitely attract at least some of Telefonica’s customers, eventually leading to increased sales. Nonetheless, it remains to be seen as to what extent O2 tastes success with the Fire phone given that the smartphone is expected to face stiff competition from Apple Inc.’s (AAPL) latest offering – iPhone6.

Telefonica currently carries a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on T
Read the Full Research Report on TEF
Read the Full Research Report on AMZN
Read the Full Research Report on AAPL


Zacks Investment Research