Analyst: Here’s Why the Apple-China Mobile Partnership Has Been Delayed


Did Apple’s (NASDAQ:AAPL) distribution deal negotiations with China Mobile (NYSE:CHL) hit a snag over declining sales of the iPhone 5C? According to a note to investors obtained by Apple Insider, KGI Securities analyst Ming-Chi Kuo attributed the distribution deal delay to the unexpectedly low sales of Apple’s mid-range smartphone.

Kuo estimated that worldwide sales of the iPhone 5C saw a quarter-over-quarter decline of approximately 17 percent,  dropping from 7.24 million units in fourth-quarter fiscal 2013 to 6.03 million units in first-quarter fiscal 2014. The analyst believes falling demand for the iPhone 5C may have precipitated a delay in the nearly completed distribution deal negotiations between Apple and China Mobile. Kuo also said Apple shipped a total of 38 million iPhone units worldwide in the first quarter of fiscal 2014.

“We believe that weak sales of iPhone 5C may trigger a re-negotiation of the Apple-China Mobile partnership,” wrote Kuo in the note seen by Apple Insider. “However, the indications are that the deal is nearing an end. While recent market speculation calls for the deal to boost 1Q14 iPhone shipments to 45-50mn units, we think this is overly optimistic.”

According to the analyst’s surveys, demand for the TD-LTE version of Apple’s iPhone 5C has fallen “dramatically” over the last few weeks, Apple Insider reports. TD-LTE is the less common 4G standard used by China Mobile. Kuo estimated total sales of the TD-LTE version of the iPhone 5C during the fourth quarter to be around 1 million to 1.5 million units, while sales in the first quarter are estimated to be less than 1 million units. Per Apple Insider, Kuo believes these numbers are lower than the California-based company’s original expectations and may have led to further negotiations with China Mobile.

The Wall Street Journal reported earlier this month that China Mobile would announce a distribution deal with Apple when it unveiled its new 4G services at a global partner conference in Guangzhou, China, on Wednesday. However, China Mobile failed to make the announcement and has denied that the deal between the two companies has been finalized, Reuters reports.

As noted on its website, China Mobile is the world’s largest carrier by subscriber base, with about 759 million subscribers. In the note obtained by Apple Insider, Kuo estimated that Apple’s partnership with China Mobile would add around 15 million to 20 million iPhone unit sales in 2014. The KGI Securities analyst also predicted that this number would increase to around 20 million to 30 million units in 2015.

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