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China Mobile May Need the iPhone

Tech In Asia (emphasis mine):

China Mobile announced a minuscule 0.3 percent profit growth over the first quarter of this year and a rather terrifying 2.98 percent drop in monthly average calling compared to the same period last year.

China Mobile is China’s biggest telecom and has been one of the country’s fastest-growing state-owned enterprises. But the numbers coming out of the company over the past few months have made it clear that it and China’s other major telecoms face a grave threat from new mobile apps like WeChat. We already knew that Chinese people were texting less than they used to, and now it seems they’re calling less as well. With barely any profit growth over the past quarter and uses of its traditional services falling, China Mobile will likely have to up what it charges for internet services like 3G just to keep from posting losses.

This sounds like a company that needs to hire a network salesman. From Asymco:

The presumption behind smartphone usage is that it leads to more browsing which leads to more network usage which in turn, leads to more network revenues and, finally, more network investment. If there is no additional browsing then there is a far smaller economic incentive to network operators to invest in infrastructure. It is this link between usage and revenues which I hypothesize drives operators to carry, subsidize and promote the iPhone. And the resilience of this link indicates that it still works.

The ASP data seems to support this hypothesis and so does the ARPU data. The more iOS is in relative use, the higher the network revenue per user. Correlation is not causation, but when combined with data about Android, we can also say that the presence of the primary iOS alternative does not lead to more revenue. In other words, if a lot of iOS is present then revenues are higher and if there is little iOS present then revenues are not higher.

There’s reason to believe Apple is willing to compromise more in China than one might expect. Perhaps China Mobile is increasingly willing to do the same. Few things would have a more immediate impact on AAPL’s near-term potential.

Benedict Evans, Twitter

Benedict Evans, Twitter

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