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China Daily Website

Apple to see sales bounce with China Mobile deal

Updated: 2013-12-24 08:52
By SHEN JINGTING in Beijing and JACK FREIFELDER in New York ( China Daily USA)

Apple to see sales bounce with China Mobile deal

Customers choose iPhone handsets at a China Mobile Ltd branch in Hangzhou, Zhejiang province. China Mobile and Apple Inc have signed a multiyear agreement to bring the latest Apple smartphone models to the mainland market. Long Wei / for China Daily

Apple Inc's partnership with China Mobile Ltd, the world's biggest telecom carrier by subscriber base, is likely to mean a significant sales bounce next year for the United States-based smartphone vendor, analysts said.

Apple and China Mobile officially announced on Monday a multiyear agreement to bring iPhone smartphones to the mainland market. China Mobile, with a subscriber base of 760 million people, or seven times as big as that of Verizon Wireless, is the last Chinese telecom operator to introduce iPhone handsets on contract in China.

Ben Bajarin, a principal analyst for Creative Strategies Inc in San Jose, California, said the deal holds great potential for Apple products in China.

"For Apple, this is obviously a huge step forward," Bajarin said Monday in an interview with China Daily. "It's significant on a number of levels, the primary one being that China Mobile is one of the largest mobile carriers in the world. It's also the biggest carrier not carrying the iPhone."

China Unicom Ltd, the nation's second-biggest telecom carrier, became the first operator to introduce iPhone devices on its network in mid-2009. China Telecom Corp Ltd, the smallest wireless carrier,tied the knot with Apple at the beginning of 2012.

Under the agreement, buyers in China can purchase the iPhone 5s and 5c beginning on Jan 17 through China Mobile's

more than 65,000 points of sale, as well as Apple retail stores across the country.

People can pre-register on China Mobile's oI cial website and customer service hotline beginning on Wednesday.

Zhang Xuan, general manager of China Mobile's department of corporate a. airs, said on Monday that the company plans to release contract prices soon for Apple's iPhone handsets.

The upcoming Chinese New Year shopping season, which falls at the end of January, will spur domestic demand and bolster Apple's bottom line, according to a research note from RBC Capital Markets LLC.

Since China Unicom and China Telecom did not have enough incentives to widely launch TD-LTE 4G networks, and the Chinese government has yet to hand out the FDDLTE licenses that the two carriers prefer, China Mobile "might be the only 4G operator in China at least in the next six months", said Bryan Wang, principal analyst of Forrester Market Advisory (Beijing) Co Ltd.

Tavis McCourt, a managing director with Raymond James Financial Inc, said the technological developments between Apple and China Mobile is an important factor.

"Given the size of the market, it should be a decent catalyst for demand," McCourt said on Monday in an interview with China Daily. "Apple will sell about 25 million iPhones in China in 2013. A 10 percent share of the smartphone market next year would put them somewhere around 40 million. Even though a 10 percent share of the Chinese market doesn't sound that impressive, ultimately that could be bigger than Apple's business in the US."

Apple to see sales bounce with China Mobile deal

Apple ranked eighth in China's smartphone market in the third quarter, with a 3.5 percent share; according to the Beijing-based research firm Analysys International. South Korea-based Samsung Electronics Co Ltd led with 18.4 percent and Lenovo Group was second with 12.5 percent.

Chinese media quoted unidenti@ ed sources as saying that China Mobile achieved a more favorable deal with Apple, compared with other telecom carriers worldwide. In Hong Kong, China Mobile shares edged up 0.8 percent and closed at HK$80.55 ($10.40) on Monday, outperforming the broader Hang Seng index, which was up 0.48 percent.

"Even if China Mobile hadn't signed an agreement with Apple, the company still would have the largest number of iPhone users on its network in China, or about 25 million people,"Wang of Forrester Market Advisory said.

China Mobile will be able to significantly reduce its churn rate for high-end users, Wang added.

China Mobile will pursue a prudent and rational mobilephone subsidy policy in 2014, Zhang said, but he did not disclose details on speci@ c subsidies for iPhones.

Bajarin, of Creative Strategies Inc, said that the ability to get Apple products into the Chinese market could be a turning point for sales in the region.

"I don't think there's a negative from being on China Mobile, but Apple will still have an uphill battle for gaining market share - given their pricing structure," Bajarin said. "The question then becomes: What level subsidies will they offer? If they can be aggressive with those subsidies, however they do it, they certainly open up the ability to monetize those customers."

"Step one is obviously being available on the market of choice," Bajarin added. "This is a long-term game for Apple. There's a lot of upside, but this is a market that is still developing.

 
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