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Apple signs elusive iPhone deal with China Mobile

Publication Date : 24-12-2013

 

Partnership with the world's biggest telecom carrier will see a significant sales boost for Apple next year

 

Apple Inc's partnership with China Mobile Ltd, the world's biggest telecom carrier by subscriber base, is likely to mean a significant sales bounce for the United States-based smartphone vendor next year, analysts said.

On Monday, Apple and China Mobile officially announced a multiyear agreement to bring iPhone smartphones to the mainland market. China Mobile, with a subscriber base of 760 million, or seven times as big as that of Verizon Wireless, is the last Chinese telecom operator to introduce iPhone handsets on contract in China.

China Unicom (Hong Kong) Ltd, the nation's second-biggest telecom carrier, became the first operator to introduce iPhone devices on its network in mid-2009. China Telecom Corp Ltd, the smallest wireless carrier, tied the knot with Apple at the beginning of 2012.

Chinese buyers can purchase iPhone 5s and iPhone 5cs through China Mobile's more than 65,000 points of sale, as well as Apple retail stores across the country, beginning on January 17.

People can pre-register on China Mobile's official website and customer service hotline beginning on Wednesday.

Zhang Xuan, general manager of China Mobile's department of corporate affairs, said on Monday that the company plans to release contract prices soon for Apple's iPhone handsets.

"We expect the alliance (between Apple and China Mobile) to help Apple realise a year-on-year growth rate of more than 50 per cent in terms of shipments in China during 2014," James Yan, senior analyst with IDC China, said on Monday.

The upcoming Chinese New Year shopping season, which falls at the end of January, will spur domestic demand and bolster Apple's bottom line, according to a research note from RBC Capital Markets LLC.

"The China Mobile version of the iPhones will be the only iPhones with 4G service in the coming months," Bryan Wang, principal analyst with Forrester Market Advisory (Beijing) Co Ltd, said.

Because China Unicom and China Telecom did not have enough incentives to widely launch TD-LTE 4G networks, and the Chinese government has yet to hand out the FDD-LTE licenses that the two carriers prefer, China Mobile "might be the only 4G operator in China at least in the next six months", Wang explained.

China Mobile will be able to significantly reduce its churn rate for high-end users, he added.

Forrester predicted that Apple could sell as many as 17 million new iPhones to China Mobile users in the first year of the alliance, Wang said.

Apple ranked eighth in China's smartphone market in the third quarter, with a share of 3.5 percent, according to Beijing-based research firm Analysys International. South Korea-based Samsung Electronics Co Ltd led the list with 18.4 per cent and Lenovo Group took second place with 12.5 per cent.

Kevin Wang, an analyst with the research firm IHS iSuppli, said Apple has a chance to emerge as a top five smartphone vendor in China next year, after the company experienced a flat phase in the Chinese market this year.

In Hong Kong, China Mobile shares edged up 0.8 per cent and closed at HK$80.55 (US$10.40) on Monday, outperforming the broader Hang Seng index, which was up 0.48 percent.

Chinese media quoted unidentified sources as saying that China Mobile achieved a more favorable deal with Apple, compared with other telecom carriers worldwide.

"Even if China Mobile hadn't signed an agreement with Apple, the company still would have the largest number of iPhone users on its network in China, or about 25 million people," said Wang with Forrester. But those iPhone users can only run their devices on China Mobile's second-generation wireless network.

It is highly possible that Apple made compromises with China Mobile in areas such as revenue sharing, Wang said.

Zhang said the company reached the agreement with Apple after years of negotiation to overcome obstacles regarding technology and business.

China Mobile will pursue a prudent and rational mobile phone subsidy policy in 2014, Zhang said, but did not disclose details on specific subsidies for iPhones.

 

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