China Mobile deal could help Apple regain ground
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Shanghai Daily, August 19, 2013
The stars may be aligning for a long-awaited deal between Apple Inc and China Mobile Ltd, the world’s biggest mobile carrier, that could help the iPhone maker claw back lost ground in its most important growth market.
Apple is expected to unveil its redesigned iPhone next month and may also release a cheaper, emerging market smartphone. Crucially, it also now has Qualcomm Inc chips that can operate even on China’s obscure networks. At the same time, Beijing is expected to grant 4G licenses by the end of the year that favor the biggest of its domestic mobile operators.
Apple has so far ducked a deal with China Mobile as this would have required a redesign inside the iPhone to work on the operator’s TD-SCDMA 3G technology. For its part, China Mobile has been reluctant to commit to the huge cost of marketing and subsidizing sales of the expensive iPhone.
By offering a mid-market Apple smartphone, China Mobile, which has 740 million users, could draw in more sophisticated, data-crunching subscribers to grow net profit that last year was only 15 percent higher than in 2008, when Apple opened its first store in China.
While the 4G licenses are expected to be based on TD-LTE technology, rather than the more widely-used FDD-LTE, the new Qualcomm chips can handle both systems, saving Apple from a major re-design just for the Chinese market.
“The circumstances and the issues that were a hindrance in the past seem to be getting resolved. So I think there’s a higher probability that potentially there’s something in the works,” said Anand Ramachandran, a telecoms analyst at Barclays in Singapore.
Apple CEO Tim Cook met China Mobile’s Chairman, Xi Guohua, in Beijing last month, his second China visit this year, prompting speculation that a deal could be edging closer.
The California-based firm’s China smartphone market share has almost halved since last year to below 5 percent.
The smaller China Unicom, which signed up with Apple in 2009, has seen annual net profits slide, largely due to the high cost of subsidizing iPhone sales.
Third-ranked China Telecom Corp Ltd entered a deal with Apple last year and, like Unicom, has seen net profit fall in recent quarters due to rising handset subsidies.
China Mobile last Thursday posted April-June net profit of 35.2 billion yuan (US$5.7 billion), up 2 percent on last year and just ahead of estimates.
“Tim Cook says he expects China to be the largest market for Apple after the US, but I don’t see how that can happen if you don’t have the largest operator as your partner,” Barclay’s Ramachandran said.
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