Apple’s iPhone Officially Launches on World’s Largest Network
Apple’s (NASDAQ:AAPL) share of the rapidly growing Chinese smartphone market will soon be boosted as its iPhones officially became available on China Mobile’s (NYSE:CHL) network on Friday. Although the iPhone 5S and iPhone 5C have been available for pre-registration through China Mobile’s website since December 25, the devices will now be available in China Mobile retail stores and Apple Stores across mainland China.
Apple CEO Tim Cook and China Mobile Chairman Xi Guohua made an appearance at the California-based company’s flagship retail store in Beijing to hand out several signed iPhones, reports Reuters. Cook also tweeted a photo of his appearance at the launch event that can be seen above.
China Mobile is the world’s largest carrier with over 763 million subscribers and most analysts believe the partnership will be a boon for Apple. According to market research firm Canalys, Samsung (SSNLF.PK) led China’s smartphone market in the third quarter of 2013 with a 21 percent share. Meanwhile, Apple was the fifth largest vendor in China with a 6 percent market share.
Despite the long-term benefits for both companies, some analysts also believe that China Mobile will initially take an earnings hit due to the ongoing establishment of its new 4G network and the cost of funding subsidies for the newly available iPhones. However, analysts have offered widely varying estimates on how much China Mobile will spend subsidizing Apple’s iPhone 5S and iPhone 5C.
For example, Reuters reports that Jefferies analyst Cynthia Meng predicted that China Mobile’s subsidies will increase to $7 billion in fiscal 2014. On the other hand, Citigroup’s Asia tech team estimated that the carrier will only have $5.44 billion subsidies in fiscal 2014, according to a research note obtained by Barron’s.
The amount of China Mobile’s subsidies may ultimately depend on how much its rivals subsidize their own iPhone deals. According to Reuters, China Unicom (NYSE:CHU) and China Telecom (NYSE:CHA) both dropped their iPhone prices by as much as $210 after China Mobile revealed its distribution deal with Apple. Besides competition from rival carriers, China Mobile may also lose some iPhone sales to China’s so-called “gray market,” where mobile phone smugglers purchase iPhones in other markets for resale in mainland China. Although the analysts may disagree on the short-term impact the distribution deal will have on China Mobile’s earnings, the new partnership is widely believed to be an important step for Apple as it grows its presence in the world’s largest smartphone market.
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