Here’s How China Mobile’s Competitors Are Responding to the Apple Deal
At the end of 2013, Apple (NASDAQ:AAPL) and China Mobile (NYSE:CHL) finally announced a partnership that has been brewing for six years, giving Apple access to sell its iPhones to customers on the world’s largest wireless carrier by subscribers with the hopes of boosting its market share in the world’s largest smartphone market.
Now, China Mobile competitor China Telecom (NYSE:CHA) is slashing the price of its iPhones in response to the deal, according to a report from Bloomberg. The prices on the phones were cut 15 percent, according to promotional material seen by Bloomberg at China Telecom retailers in Beijing. Through a combination of price cuts and gifts, the price of an iPhone 5S on the carrier was reduced from 5,288 yuan to 4,488 yuan.
China Mobile is set to begin selling the iPhone on its network next week after accepting preorders on Christmas Day. Pricing and possible subsidies for the iPhones on China Mobile have not yet been made public.
Analysts have been weighing in on the China Mobile deal with Apple months before it was officially announced. While the general consensus is that Apple will benefit from the deal, which grants the company access to 700 million subscribers, analysts vary in how many iPhones they believe Apple can sell to Chinese consumers. Estimates of China Mobile’s iPhone sales in 2014 have varied from less than 10 million (Bank of America) to up to 24 million (Cantor Fitzgerald).
While the iPhone may have a large following in China and be seen as a status symbol, not many Chinese consumers can actually afford to buy one. Apple has been losing market share in China as the number of available lower-cost smartphones grows. According to current rankings, the iPhone maker controls just a 6 percent share of the Chinese market, falling behind Samsung (SSNLF.PK), Lenovo (LNVGY.PK), Yulong, and Huawei, per research firm Canalys.
One way that carriers could try to get devices into the hands of more people would be to offer higher subsidies on the phones. The increased iPhone competition will result in China’s carriers each attempting to offer the best deal on the iPhone to win customers. Mizuho Securities analyst Marvin Lo has already estimated that the subsidies coupled with marketing efforts and the money poured into a 4G network will be a drag on China Mobile’s financials for the year, even with sales of the iPhone 5C and iPhone 5S.
China Telecom is the country’s third-largest wireless provider, behind China Mobile and China Unicom (NYSE:CHU). The carrier has offered the iPhone since 2012.
More from Wall St. Cheat Sheet:
- China Mobile Takes Initial Hit from Apple Partnership
- Analyst: Don’t ‘Over-Exaggerate’ Apple’s China Mobile Deal
- Three Analysts Weigh in on Apple-China Mobile Deal
Follow Jacqueline on Twitter @Jacqui_WSCS