Apple, China Mobile sign deal

‘IMMEDIATE BOOST’?:Analysts say a key issue is whether the deal would lead to additional sales for Apple or only prompt existing users to switch to China Mobile

AP, BEIJING

Tue, Dec 24, 2013 - Page 15

Apple Inc and China Mobile Ltd (中國移動) yesterday announced a long-anticipated agreement to bring the iPhone to the world’s biggest phone company.

The deal might help boost iPhone sales in a market where Apple Inc faces intense competition. The iPhone is available in China through two smaller carriers, but the latest deal links it with a bigger network and state-owned China Mobile’s marketing power.

The iPhone is popular with Chinese customers who can afford it, but it has been eclipsed by lower-priced smartphones from Samsung Electronics Co and local brands.

The iPhone 5S and 5C will go on sale in Apple and China Mobile stores beginning on Jan. 17.

The companies did not announce pricing or the terms of the agreement. The deal comes a month before China’s Lunar New Year holiday late next month, a big gift-buying season.

That “will provide an immediate boost to Apple’s share in China,” said analyst Nicole Peng (彭路平) of Canalys, a research firm.

Forecasts of possible increased iPhone sales under a deal with China Mobile vary widely, from 10 million to 40 million. A key issue is whether it leads to additional sales or only prompts existing users to switch to China Mobile.

The iPhone will help China Mobile promote a new 4G network that received government approval this month. However, analysts say that Apple needed the agreement more than the Chinese carrier. That gave China Mobile leverage in negotiations over how to split costs, which for the high-priced iPhone usually includes subsidizing handset sales.

The iPhone faces tough competition from cheaper smartphones running Google’s Android software. Collectively, Android phones far outsell Apple’s iPhone.

Apple chief executive officer Tim Cook told the official Xinhua news agency in January that he expected China to surpass the US as its biggest market.

About 50 million iPhones have been sold in China in the past two-and-a-half years, according to analyst estimates.

Apple’s share of China’s smartphone sales declined to 6.2 percent in the third quarter from 7.9 percent a year earlier, according to Canalys. Samsung’s share expanded from 14.1 percent to 21.2 percent over the same period.

Samsung’s advantages include being able to offer carriers a mix of phones priced as low as 1,000 yuan (US$150), while Apple competes only in the highest market tier, Canalys said.

China Mobile has more than 750 million mobile accounts. However, a survey by Bernstein Research said some China Mobile customers use smaller carriers for data service. Apple already has agreements with China Telecom Ltd (中國電信) and China Unicom Ltd (中國聯通), which have about 455 million mobile accounts.

As for subsidies, Unicom pays 2,500 yuan of the iPhone’s 5,499 yuan cost in exchange for a customer signing a two-year contract to pay a minimum of 186 yuan per month.

Analysts say China Mobile will have to match those terms to achieve significant sales.

China Mobile wants to have the world’s largest 4G network. It plans to have 4G services available in 16 cities by the end of this year and to provide coverage for 340 cities by the end of next year.