Is Apple About to Close a Deal with China Mobile?

ChinaApple (NASDAQ:AAPL) may be on the verge of dramatically expanding its footprint in the world’s most populous country. Apple CEO Tim Cook met with China Mobile (NYSE:CHL) Chairman Xi Guohua in Beijing on Tuesday, reports Reuters. According to an emailed statement from China Mobile via Reuters, the two executives discussed “cooperation.”

China Mobile is country’s largest carrier, with over 700 million subscribers, but it does not currently have a distribution deal with the Cupertino-based iPhone maker. A deal with China Mobile is widely considered to be essential for Apple if it wants to increase its share of the burgeoning Chinese smartphone market.

Apple’s third-quarter revenue in the Greater China market fell 14 percent from the same quarter last year, and declined 43 percent from the March quarter this year. In the March quarter, Greater China accounted for 19 percent of Apple’s total sales. However, this crucial market only accounted for 13 percent of Apple’s sales, or $5 billion, in the June quarter. Greater China includes mainland China, Hong Kong, and Taiwan.

Much of the revenue decline in this market could be attributed to falling iPhone sales in Hong Kong during the last quarter. In an earnings conference call with investors, Cook admitted, “it’s not totally clear exactly what had occurred.”

However, a distribution deal with China Mobile could significantly boost Apple’s sales in the Chinese market. Market research firm IDC predicts that smartphone shipments in China will exceed 460 million units by 2017, to reach a market size of $117.8 billion.

Although premium smartphone maker Apple doesn’t currently offer any new mid-range devices, like rival smartphone maker Samsung (SSNLF.PK), Apple is widely expected unveil a low-cost plastic iPhone this fall that could potentially increase its sales in the Greater China market. Apple also sells a large number of older generation devices in China, including the iPhone 4.

Here’s how Apple and China Mobile have traded so far today.


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