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China Mobile-Apple iPhone pact 'very big deal'

Gregg Keizer | Dec. 6, 2013
World's largest carrier -- over 700M subscribers -- offers huge opportunity for Apple

China Mobile, the world's largest mobile carrier, has finally inked a deal with Apple to sell the iPhone, according to a report by the Wall Street Journal.

On Wednesday, the newspaper ( subscription required) cited anonymous sources who said China Mobile, which boasts an estimated 740 million subscribers, will announce iPhone availability later this month, most likely at China Mobile's conference, which begins Dec. 18.

China Mobile is one of the world's few major mobile carriers that has not sold the iPhone. Investors have been waiting years for the China Mobile deal, believing it would significantly increase iPhone sales in the country and boost Apple's stock price.

In early trading Thursday, Apple was up 1.4% to $572.67.

The Wall Street Journal's report follows news yesterday that the Chinese government had issued 4G licenses to China Mobile and other carriers, including China Unicom and China Telecom, both which sell the iPhone. Previously, China Mobile had said it would deal the iPhone only when it could offer it on the faster network.

Earlier this year, Apple's iPhone was granted a license from government authorities to operate on the 4G network protocol China Mobile will use.

"This is a very big deal," said Ben Thompson, an independent analyst based in Taiwan who covers technology on his Strategery website. "The two pertinent facts about China are that there is tremendous income disparity, and 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."

In the third quarter, the most recently reported by Apple, China was the firm's third-largest market, after the Americas and Europe, with $5.7 billion in revenue, up 6% year-over-year. For the 2013 fiscal year, which ended in September, the Greater China region -- China, Hong Kong and Taiwan -- generated $25.4 billion in revenue, up 13% from the year before and representing 15% of the company's worldwide total.

But while a China Mobile deal has huge potential for Apple, its iPhone currently has a much smaller share there than just a few years ago, as cheaper Android phones, most of them made by in-country firms, have captured the bulk of the market.

The iPhone 5C, a less-expensive sibling to the flagship iPhone 5S, was expected by some analysts to come in price points competitive with Chinese-made Android smartphones. Instead, Apple stuck to its premium-brand strategy.

Even so, researchers believe that Apple will boost market share and rake in revenue from an expansion in the country. "Thanks to its cooperation with China Mobile and the launch of low-cost iPhone, iOS will see a rapid growth in 2014, and ... its market share [in China will] double that of 2013," market research firm IDC forecast in September.


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