Apple's China deal faces 4G hurdle

CHALLENGES AHEAD: Analysts warned that the impact of a deal between Apple and China Mobile depends on the quality of the latter's 4G network. Also, many of the carrier's customers are already using iPhones.


    Dec 24, 2013

    Apple's China deal faces 4G hurdle


    CHINESE users welcomed a long-awaited tie-up between Apple and China Mobile, the world's biggest wireless operator, but analysts warned yesterday that the deal's impact depends on the quality of the carrier's 4G network.

    On Sunday, the United States technology giant and China Mobile unveiled the agreement to bring the iPhone to customers on a network with an estimated 760 million subscribers and, until now, dominated by low-cost Android smartphones.

    The US company's iPhone 5s and iPhone 5c phones will be available at China Mobile and Apple retail stores across mainland China starting on Jan 17, they said in a joint statement.

    Apple's potential customer pool in China is limited by the cost of the iPhone, which is more than the equivalent of US$700 (S$890). Most buyers in China also don't get the discounts and subsidies that customers in the US enjoy.

    "Perhaps 100 million Chinese people can afford premium products such as the iPhone," Mr Benedict Evans of Enders Analysis wrote in an e-mail message. "Important to note, this isn't quite 750 million new customers."

    Apple iPhones can be used on China Mobile's 2G network, but not on its higher-speed 3G network, due to a home-grown standard the carrier has adopted.

    Negotiations between Apple and China Mobile took years, with one key hurdle reportedly being the US company's demand for sales-volume guarantees.

    The deal gives Apple a bigger entry into the huge Chinese market, as the company is facing declining market share and is seeking to counter the flood of low-cost smartphones from rivals.

    But analysts said that the immediate benefit from the partnership will be limited, given that many of China Mobile's customers are already using iPhones, lessening the prospect of a sharp boost to sales.

    They said the main rationale for the deal was likely both companies' strategy in the 4G era, which will allow users to, among other things, watch movies and play games on mobile networks at a much faster speed and in better quality.

    "If (China Mobile's) 4G network comes online (with good quality), the impact will be rather big," said Mr Xu Zhipeng, a Beijing-based analyst with research firm Zero2ipo Group.