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China Mobile-Apple iPhone pact 'very big deal'

China Mobile-Apple iPhone pact 'very big deal'

World's largest carrier -- over 700M subscribers -- offers huge opportunity for Apple

China Mobile, the world's largest mobile carrier, has finally inked a deal with Apple to sell the iPhone, according to a report by the Wall Street Journal.

On Wednesday, the newspaper ( subscription required) cited anonymous sources who said China Mobile, which boasts an estimated 740 million subscribers, will announce iPhone availability later this month, most likely at China Mobile's conference, which begins Dec. 18.

China Mobile is one of the world's few major mobile carriers that has not sold the iPhone. Investors have been waiting years for the China Mobile deal, believing it would significantly increase iPhone sales in the country and boost Apple's stock price.

In early trading Thursday, Apple was up 1.4% to $572.67.

The Wall Street Journal's report follows news yesterday that the Chinese government had issued 4G licenses to China Mobile and other carriers, including China Unicom and China Telecom, both which sell the iPhone. Previously, China Mobile had said it would deal the iPhone only when it could offer it on the faster network.

Earlier this year, Apple's iPhone was granted a license from government authorities to operate on the 4G network protocol China Mobile will use.

"This is a very big deal," said Ben Thompson, an independent analyst based in Taiwan who covers technology on his Strategery website. "The two pertinent facts about China are that there is tremendous income disparity, and there are a ton of people. So while many Western markets may have a greater percentage of the population that can afford an iPhone, the absolute number of Chinese who are potential customers is very high as well."

In the third quarter, the most recently reported by Apple, China was the firm's third-largest market, after the Americas and Europe, with $5.7 billion in revenue, up 6% year-over-year. For the 2013 fiscal year, which ended in September, the Greater China region -- China, Hong Kong and Taiwan -- generated $25.4 billion in revenue, up 13% from the year before and representing 15% of the company's worldwide total.

But while a China Mobile deal has huge potential for Apple, its iPhone currently has a much smaller share there than just a few years ago, as cheaper Android phones, most of them made by in-country firms, have captured the bulk of the market.

The iPhone 5C, a less-expensive sibling to the flagship iPhone 5S, was expected by some analysts to come in price points competitive with Chinese-made Android smartphones. Instead, Apple stuck to its premium-brand strategy.

Even so, researchers believe that Apple will boost market share and rake in revenue from an expansion in the country. "Thanks to its cooperation with China Mobile and the launch of low-cost iPhone, iOS will see a rapid growth in 2014, and ... its market share [in China will] double that of 2013," market research firm IDC forecast in September.

Apple has paid more attention to China this year, launching the new iPhones in that market in its initial wave for the first time. According to researcher Canalys, the move paid off, as Apple returned to the top-five smartphone maker list in the third quarter.

But when the iPhone debuts on China Mobile, it's inevitable that questions will remain about Apple's ability to grow its share, whether there or globally, said Thompson.

"For several years now any questions about Apple's growth prospects have had a simple answer: just wait until they add NTT Docomo and especially China Mobile," Thompson wrote. "Well, they now have, and the only way forward for significant iPhone growth is the long slog of winning new customers. I certainly think Apple is up to it, but there are no more home runs."

Apple added NTT Docomo, Japan's largest mobile provider with an estimated 61 million customers, to its list of iPhone sellers in September.

Gregg Keizer covers Microsoft, security issues, Apple, Web browsers and general technology breaking news for Computerworld. Follow Gregg on Twitter at @gkeizer, or subscribe to Gregg's RSS feed . His email address is gkeizer@computerworld.com.

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Tags IT industrymobilesmartphoneswirelessAppleNetworkingconsumer electronicschina mobilewall street journalChina UnicomChina TelecomThe Wall Street JournalMobile/Wireless

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