Apple, China Mobile Sign Deal to Offer iPhone

Posted on Author by Ben Thompson

From the WSJ

China Mobile Ltd. has signed a long-awaited deal with Apple Inc. to offer iPhones on its network, a person familiar with the situation said, an arrangement that would give the U.S. technology giant a big boost in the world’s largest mobile market.

The rollout of iPhones on the world’s largest mobile carrier by users, with over 700 million subscribers, is expected to start later this month, around the time of a Dec. 18 China Mobile conference in Guangzhou, according to two people familiar with the carrier’s plans. China Mobile is one of the world’s last major carriers that doesn’t offer the iPhone.

At the Dec. 18 event, China Mobile plans to unveil a brand for its fourth-generation, or 4G, network. China Mobile executives have said they would only begin to sell the iPhone after introducing 4G services. China’s Ministry of Industry and Information Technology said Wednesday it gave licenses to China Mobile and its smaller rivals to operate the higher-speed mobile networks, clearing one of the last hurdles.

This was all but confirmed back in September when the iPhone got a TD-LTE/TD-SCDMA license, but now we at least know the date.

Three thoughts:

  1. This is a very big deal. Feel free to ignore anyone making snarky comments about China’s average monthly wage being the same as the price of an iPhone 5C. The two pertinent facts about China are that:
    • There is tremendous income disparity
    • There are a TON of people

    So while many Western markets may have a greater percentage of the population that can afford an iPhone, the absolute number of Chinese who are potential customers is very high as well.

    China market potential

    China Mobile covers 50% of those customers.1

  2. The China Mobile iPhone will be a BIG upgrade – and it will only be available in China. There have been reports that there are as many as 45 million iPhones on China Mobile’s network, and every single one of those runs at EDGE speeds thanks to China Mobile’s use of the aforementioned TD-LTE/TD-SCDMA networking. It’s fair to wonder how much customers value LTE>3G, but LTE>Edge is a massive upgrade indeed; all of those 45 million customers are prime candidates for the China Mobile iPhone.

    Moreover, calling it the “China Mobile iPhone” is not an accident. This is a third version of the iPhone that will only be available for sale in China. There will be no gray market undercutting iPhone sales as is the case for China Unicom and China Telecom. At the very least, this fact alone will provide a nice boost to Apple’s quarterly China numbers.

  3. The low-hanging fruit is gone. For several years now any questions about APPL’s growth prospects have had a simple answer: just wait until they add NTT Docomo and especially China Mobile. Well, they now have, and the only way forward for significant iPhone growth is the long slog of winning new customers. I certainly think Apple is up to it, but there are no more home runs.

  1. I don’t know this for a fact – which is why this is a footnote – but I would bet there is a certain measure of prestige associated with having China Mobile – the lead Chinese telecom – as your carrier. In other words, while 50% of China’s mobile subscribers may be on China Mobile, the percentage of “rich” subscribers may be even greater ↩