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Sinocism editor Bill Bishop wrote a thoughtful piece about Apple (AAPL) ("Apple Needs China Mobile (CHL) Deal to Regain Smartphone Mojo") that ran in USAToday late last week. Reading between the lines, Bill's motive for writing the article is to give context to the excitement that rumors of a China Mobile deal are stoking among Apple shareholders. Since even before the iPhone was officially introduced in China in late 2008, speculation has been rife about whether, when, and how China Mobile (CMMC), the nation's largest carrier in number of subscribers, would offer the phone to its users.

Five years later, the speculation continues. Yet while Apple fans talk up the company's stock with visions of a Yangtze-sized cataract of money that flow into Cupertino's coffers, questions persist about exactly how big of a win it would be for the company.

Tim's empty quiver

First, as Bishop points out, Apple lacks leverage with China Mobile. At this point, Tim Cook's company needs CMMC more than the carrier needs Apple. The iPhone has a shrinking share of an increasingly competitive market, and the company has made no secret of the extent to which its profits depend on China. China Mobile would almost certainly have used those facts as leverage in negotiations.

Arguably, China Mobile does suffer for not having the iPhone in its display cases, but the company has managed to do quite well without Apple, especially due to the selection of devices that run on its unique TD-SCDMA 3G network and its new TD-LTE fourth-generation network. For this reason, it is possible, if not likely, that Apple made commercial concessions to get China Mobile to offer the phone. China Mobile is unlikely to be prepared to subsidize sales of the phone, especially given its keen watch on cost management over the past years. Apple may not be able to expect the high returns it once enjoyed on the device, especially if China Mobile agrees to put a bunch of advertising dollars behind the introduction.

More users, or same old users?

Second, and more important, we do not know the extent to which China Unicom (CHU) and China Telecom (CHA) have slurped up everyone in China who wanted an iPhone. Because a phone number change is mandatory when upgrading to a smartphone, many people took the leap with China Unicom, whose once anemic network has improved radically in recent years. As such, most of those who really wanted an iPhone may well have gone ahead and jumped to China Unicom or China Telecom.

Granted, China Mobile does have 130 million 3G users who don't have an iPhone, and you can bet if China Mobile cuts a deal with Apple both companies will put big marketing dollars behind the device. But most of those users were added to CMMC's 3G rolls after China Unicom introduced the iPhone, so you have to wonder whether those users are really going to care.

Finally, while a deal with China Mobile is a necessary step for the iPhone to regain its market share and "mojo" in China, it is not likely to be sufficient. As even Bishop admits, the iPhone is not "cool" anymore. Making it available to a whole lot more people is not going to help the cool factor much, and is likely to sandblast off whatever remains of the iPhone's snob appeal. It will become, in the words of a good friend of mine, like "wallpaper:" ubiquitous and unremarkable. And that, for Apple investors, means that the premium will be eroded.

More than just distribution

Facing a steroidal Samsung, plucky HTC, and local favorites Xiaomi, Huawei, ZTE, and Lenovo, all running some form of the increasingly impressive Android operating system, the iPhone needs more than a larger addressable market: it needs to get sexy again.

That's a tall order. Chinese mobile users swarm to and discard phone manufacturers periodically, never to return in the same masses again. This happened to Ericsson (ERIC) and Nokia (NOK) in China. Within three years of getting dumped by Chinese users, Ericsson was groping for a partner to save its bacon in the devices business. Nokia lost its luster three years ago, and today its mobile phone business on its way to becoming part of Microsoft (MSFT).

I'm not ready to suggest that Apple is entering a similar tailspin. But what it does over the next six months will determine whether it regains its seat at the head of China's mobile phone table, or whether it gets shoved further and further down the ranks in a very robust market.

Disclosure: I hold shares in FB, UNP, CAT, BAC, C, JPM, MSI.

Source: Bill Bishop On Apple: We Need More Mojo