Despite Slow Start the Future is Bright for Apple and China Mobile

by Matt Klassen on March 21, 2014

Three months into the landmark deal between China Mobile, the world’s largest mobile carrier by subscriber volume, and Apple, the maker of the still beloved iPhone, and the jury is still out on the success of the partnership in general and the overall popularity of Apple’s flagship phone behind the Great Wall.

In fact, on the face of it the initial returns on the partnership are not terribly positive, with China Mobile experiencing its first quarterly loss in over 14 years as it struggles with the cost of both 4G LTE development and of having Apple as a new friend. Further, there was the revelation that China Mobile has sold relatively few iPhones to date, news that analysts were quick to interpret as “well below expectations.”

But the true story of Apple’s first few months with China Mobile lies deeper within the numbers, as while no one can argue that Apple is still well off its target of 17 million phones in this year, the fact remains that only 1.34 million people are currently 4G users in China, and the vast majority of those use the iPhone.

“Most of our 1.34 million 4G users are using an iPhone,” said China Mobile Chairman Xi Guohua, adding that “It’s just been getting started for one or two months. So far it’s hard to tell how that will affect our business.”

Reuters, who initially covered this story, put a distinctly negative spin on such a revelation, noting that “China Mobile executives…hinted that sales of the iPhone, which analysts had expected to reach at least 17 million units in the first year after the launch, are well below expectations.” [italics mine]

While there’s no arguing that China Mobile is lagging behind the estimated 17 million iPhone units sold, that’s only because the 4G LTE market has a little over a million users, a base that the carrier expects to grow to some 50 million by years end. Looking at the trend, if “most” current 4G LTE users have purchased the iPhone, simply extrapolation would mean that China Mobile will blow away all iPhone sales estimates by year’s end.

As CNET’s Don Reisinger explains, “If Apple can keep its lead, that could mean a boatload of iPhone sales inChina,” and a vindication of Apple’s partnership with the Chinese mobile behemoth.

You see, while China Mobile does boast the largest subscriber base in the world (776 million), the carrier has long lagged behind smaller national competitors who were able to establish better wireless networks, offering greater performance and reach, leaving device makers to dream about the day when the country’s largest carrier would finally enter the 4G world.

Now with the development of its 4G LTE network and the addition of Apple’s iPhone, China Mobile has started to see immediate returns, adding exponentially more subscribers in February compared to its rivals, good news for the carrier, great news for Apple.

While China Mobile will undoubtedly struggle through a few successive quarterly losses, particularly as its wrestles with the initial cost of Apple’s debilitating subsidies, there’s no question that the Cupertino company is laughing all the way to the bank, knowing that despite this slow start there’s nowhere to go from here but up in a largely untapped market like China.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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