China Mobile Signs Deal to Sell iPhone

China Mobile Signs Deal to Sell iPhone

China’s largest MNO, China Mobile, has signed a multiyear agreement with Apple to sell the iPhone to its subscribers. The deal was announced on 22 December, and the phones (models 5s and 5c) will go on sale in Apple and China Mobile stores on 17 January, although online pre-orders were being accepted as of 25 December. The financial terms of the partnership have not yet been disclosed, nor has the pricing of the devices

Tarifica’s Take

This long-awaited deal—six years in the making—gives Apple access to a huge new market. The iPhone has been available in China for several years through other operators, but China Mobile’s customer base of 760 million (62 percent of the country’s mobile subscribers) is bound to be a game changer for Apple. The country’s second-largest operator, China Unicom, began offering the iPhone in late 2009, and the third-largest, China Telecom, introduced it in early 2012. Nevertheless, the present deal is very significant in terms of potential customers for Apple, since China Mobile has twice as many subscribers as China Telecom and China Unicom put together. Pent-up demand for the iPhone in China is generally considered to be very strong; estimates of the number that will be sold through China Mobile in 2014 range from 12 million to 30 million. At the low end of the estimate, that would represent 8 percent of total worldwide iPhone sales in 2012. The deal comes at a good time for Apple, which has been losing market share in the face of competition from devices that run Android and other operating systems and which has seen very little increase in its share price during 2013.

From the standpoint of China Mobile, the addition of the iPhone is desirable in that it has the potential to win back subscribers who switched to China Unicom or China Telecom to get the iPhone. More importantly, though, it will allow the operator, which launched 4G service in early December, to upgrade existing subscribers to more costly 4G plans. The iPhone can run on China Mobile’s existing 3G network, but only the 4G network will allow users to access the full range of the device’s capabilities. Lack of 4G had been a stumbling block in China Mobile’s negotiations with Apple, which was unwilling to support the MNO’s 3G network due to its variance from global standards.

The situation looks promising for China Mobile, but the operator will need to strike the right balance in terms of subsidies. If the devices are too heavily subsidized, the provider could lose money on them, as China Telecom did during its first year of offering the iPhone. If they are not subsidized enough, Chinese consumers may balk at their steep prices.