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Monday, 23 December 2013
Apple Signs New Deal With China Mobile
Apple's Deal With China Mobile Means Millions More iPhone Sales
AppleAAPL+0.83% has spent the last six years trying to ink a carrier deal withChina MobileCHL-0.42%, and for good reason: the state-backed carrier is the biggest in the world with 760 million wireless customers, more than double the population of the United States. For Apple to truly get a foothold in China, it needed China Mobile. On Sunday, the company announced it had finally entered a multi-year contract to sell its iPhone through China Mobile, representing what may be CEO Tim Cook’s most important breakthrough in China.
“Apple has enormous respect for China Mobile and we are excited to begin working together,” Cook said in a press release, adding, “We can’t think of a better way to welcome in the Chinese New Year than getting an iPhone into the hands of every China Mobile customer who wants one.”
As part of the deal, the iPhone 5C and 5S will be available for pre-order from China Mobile’s website from Dec. 25., while the device will be available from Apple and China Mobile retail stores from Friday, Jan. 17, 2014.
Having sold 125 million iPhones in fiscal 2012, Apple could sell another 17 million through China Mobile alone in 2014, according to estimates from Piper Jaffray analyst Gene Munster, adding 5% to the Wall Street’s revenue estimates for Apple next year. Analysts at Robert W. Baird & Company believe Apple could sell an even bigger 30 million iPhones through China Mobile in 2014.
Not surprisingly, Apple gave few insights into the deal’s terms, or of how much the iPhone will cost on the carrier which controls an estimated 65% of China’s wireless market. Price and subsidization are often cited as major sticking points in the effort to get a deal with China Mobile, even after Apple successfully struck deals with smaller Chinese networks China UnicomCHU-1.13% and China Telecom. Apple reportedly prefers to take a large cut of subsidy payments from mobile networks, and the Chinese government which controls China Mobile, hasn’t liked the prospect of a “heavy subsidy burden.”
The New York Timesis reporting that China Mobile pushed for the deal because it was seeing its subscribers move to second and third-tier competitors who carried the device. But it’s also possible that in the face of rising competition from local device makers like ZTE and the ambitiously low-cost Xiaomi, which sell Android phones in the $100 – $150 range, Apple’s Cook gave some leeway on subsidy payments.
At $525, the iPhone’s average selling price in China is already lower than its ASP of $575 in the rest of the world, according to Piper Jaffray’s Munster. It will have been a very tricky negotiation.