Will Apple's Deal With China Mobile Turn Things Around ?
Seeking Alpha Analyst Since 2014
China Mobile, the world's largest mobile phone operator with over 760 million subscribers is finally offering an iPhone made for its network. Apple was greeted with long queues of line & overwhelming response whenever Apple launched any of its products. However, despite the presence of, none other than, Apple chief executive, Timothy D. Cook the opening in Beijing was not very luminous because of the fact that it has been already a year that iPhone 5 has come out.
China is the biggest consumer of smart phones around the globe. It is vital for every smart phone manufacturer to not only maintain its existing market share but also to grow. Apple's market share has been rattling in the Chinese market due to fierce competition from Samsung and home grown brands like Yulong & Lenovo.
iPhone was introduced in China five years ago by the country's second-largest mobile operator, China Unicom when they found a ready market among trend-conscious consumers. In fact, Apple added the country's third-biggest carrier, China Telecom, to its line-up shortly. Even then, its market share in China has fallen into the single digits at present.
China Unicom and China Telecom, which together have about 450 million customers, have cut the price of their competing iPhone packages only modestly since China Mobile announced its Apple agreement in December. However, there is a debate going on whether there would be any subsidy war or not, as can be seen in difference of opinion between two leading research firms as follows:
"There won't be a subsidy war among the three operators because they have already learned that they need to control this," said Jun Zhang, an analyst at Wedge Partners, an equity research firm.
"I don't see a price war coming where Apple is engaged in the war, but I do think you're going to see a subsidy war coming," said Michael Clendenin, managing director of Shanghai-based RedTech Advisors.
The main advantage of China Mobile over its two rivals is the access to fast network it is building, using so-called 4G technology. China Unicom and China Telecom are still relying on the slower, previous generation technology.
According to China Mobile, 45 million people were already using iPhones on its network before the deal with Apple. Most of these were acquired from Hong Kong or via other unofficial channels & hence were much cheaper, resulting into a major threat for Apple.
Whether this deal results in a turnaround strategy for Apple or not will only be unveiled by time when it launches iPhone 6. If the next version of iPhone is priced conservatively & China Mobile gets the first launch, then nothing can stop Apple's growth in Chinese markets.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.