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Apple's Stealth China Mobile Plan?

Posted by: Peter Burrows on September 01

Despite ongoing talk about possible tie-up with the mother of all cellular carriers, China Mobile, equity research firm Wedge Partners believes Apple may have found a new way to sell iPhones to some of the carrier’s half-a-billion subscribers. Wedge’s managing principal, Matt Mathison, thinks Apple will ink a deal with a large cell-phone retailer called Di Xing Tong, which owns hundreds of storefronts in China. The chain is owned by Foxconn, the massive contract manufacturer that builds so many of Apple’s products.

This could be a huge deal, says Mathison. After two years of on-again, off-again talks with Apple, China Mobile seems to have gone its own way. It has announced its own smart phone operating system platform, dubbed Ophone, and phones based on the platform will go on sale this month. But if Apple gets this retail presence, Chinese consumers would be able to buy phones and unlock them for use on China Mobile’s network. Mathison believes Apple could sell as many iPhones through this retail channel in 2010 as it will through its recently announced deal with China Unicom, which he says has a poor network and poor reputation with consumers:

We believe that Apple has concerns about China Unicom’s ability to distribute the phone, since Unicom has weak marketing skills and its WCDMA network quality is poor. We think the sales of iPhone through China Unicom will be around 2-3 million units, depending on subsidies and service packages in 2010.

Says Mathison in an interview, “all of a sudden, the number of iPhones Apple can sell in China in 2010 could double.” Note that there are also reports that Apple is still in negotiations with China Mobile.

Like the China Unicom model, Foxconn’s won’t feature Wifi, he says.

So who will buy iPhones through these stores? Besides disgruntled China Unicom customers that want to switch carriers, there are many millions of people for whom the iPhone is not currently an option, since China Unicom lacks coverage in many large cities.

Mathison doesn’t believe Apple will officially support unlocking the devices, but won’t do anything to shut it down, either. After all, conventional wisdom is that more than a million Chinese already use iPhones, that were either bought overseas, or bought on the black market. Buying at a Di Xing Tong outlet near you could be more convenient, and cheaper. Mathison says a smuggled 8 gig iPhone can cost 3,600 to 4,000 RMB or up to 5,000 RMB for a 16-gig iPhone, compared to a China Unicom phone that costs 2,500-3000 RMB, with a service charge of 189 RMB per month. His argument is that the stores might also be able to beat that black market price.

Apple had no comment on this story. By the way, Wedge was ahead of the game on predicting the earlier-than-expected launch of the iPhone in China, as I blogged about on July 10.

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Reader Comments

Dave

September 1, 2009 08:06 PM

Why doesn't Apple offer China Mobile an iPhone that will support BOTH China Mobile's App Store and ALSO Apple's iTunes App Store. Then the user can decide which service to use or may use both.

Dave

September 1, 2009 08:07 PM

Why doesn't Apple offer China Mobile an iPhone that will support BOTH China Mobile's App Store and ALSO Apple's iTunes App Store. Then the user can decide which service to use or may use both.

Ted morton

September 1, 2009 09:50 PM

How does this work since china mobile isn't GSM?

Downs

September 2, 2009 05:19 AM


iPhone won't work with China Mobile's TD-SCDMA-based 3G network but works with its GSM network. The issue is who would buy an iPhone only for 2G services ?

Synthmeister

September 2, 2009 12:11 PM

I'm curious. Does China allow the iPod touch to be sold there? With wifi? If so, Apple should be dumping as many iPod touches on China as possible. It just makes their wifi and app store hang-ups look ridiculous.

I don't get the wifi ban. Seems like that will just make black market iPhones from Japan, India, Russia, Hong Kong, etc. extremely desirable! I mean, if you have your choice of a non-wifi iPhone which is only $100 cheaper than a wifi version, which would you go for?

Dan Butterfield

September 2, 2009 12:26 PM

Probable iPhone distributors include: China Unicom’s Vsens and major retailers Carrefour (134 superstores in China), Dixintong a.k.a. D-Phone (largest handset chain-store in China – Rumors of an iPhone distribution deal with Dixintong go back to Dec 2007), Gome (610 stores – controlled by Huang Guangyu, China’s richest man) and Suning. There were also unconfirmed reports that Best Buy China and Wal-Mart China might sell iPhones. Cybermart was also in the mix, but that report was denied by Foxconn (Cybermart’s parent). Last but not least … Apple Stores in Beijing – Sanlitun and soon at Qianmen.

More > http://iphonasia.com/?p=6387

Interconnect

September 2, 2009 01:12 PM

Mr. Wang Chairman China Mobile visit to Ms. Wang Chairperson HTC, Taiwan for deal with the world's largest smart phone maker, on Windows, Open Source, Google Android, etc., and the Ophone. China Mobile in-fact respectably mother of all cellular carriers. The introduction of Blackberry and HTC smart phone to users of China Mobile Pakistan. Marketing Director China Mobile Pakistan Salman Wasay is the brainchild for Pakistan's most agressive cellphone licensee in the presence of five other operators still makes the company a mother of Cellphone in Pakistan. China Mobile will be the father of Middle East and African regional markets for China Mobile. The regional markets of China Mobile will be waiting for the Ophone, and will be supported by the regulatory, commercial, and social networks of Pakistan and beyond. Mr. Mathison China Mobile Pakistan market operations should consider Pakistan should consider Ophone for the test marketing, software development with the excellent HR for Apps. Store. Pakistan market would welcome the first Ophone in Pakistan in the holy fasting month of Ramadan and the Eid Festival in September to rejoice, with Mr. Salman Wasay.

KT

September 2, 2009 10:37 PM

If urban disposable income in China is 858 yuan/month ($125/mo), on what planet will 3,000 yuan iPhones sell in the millions...?

This sounds like a pump & dump operation by options traders on Apple stock. Gee, that's never happened before.

Steve

September 4, 2009 10:45 AM

It is important for your readers to know that China Mobile's 3G system is the home-grown TD-SCDMA, therefore Apple would need to redesign the iPhone's hardware before any CM user could enjoy a 3G experience.

Spare a thought then for the million or more iPhone users already in China; the vast majority of whom are connected to the old non-3G China Mobile network.

I recently spoke with some of these people and have published the findings at http://www.chinesecurrents.com

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A blog on the daily doings of Apple and the many companies in its orbit, with insight and analysis by two longtime Apple-watchers BusinessWeek Senior Writer Peter Burrows and BusinessWeek.com Senior Technology Writer Arik Hesseldahl.

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