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Russian Gray Market Offers Yuppies IPhone 5 for $3,700

The iPhone 5 is priced at as much as 115,000 rubles ($3,700) in the Russian gray market, topping previous models as Web vendors bet on demand from the country’s wealthy ahead of the redesigned device’s official release.

“Small companies in the gray market are trying to skim the cream off,” said Vladislav Zavyalov, a marketing manager at re:Store Retail Group, an official seller of Apple Inc. (AAPL) gadgets with 94 stores in Russia and Europe. “The Russian yuppies are ready to pay this money to get the hottest stuff first.”

The Web stores are offering delivery soon after the phone goes on sale in the U.S. and eight other countries on Sept. 21. Official sales in Russia will probably start mid-December and the price is likely the same as for the iPhone 4S, which was as much as 39,990 rubles for the 64-gigabyte model, said Eldar Murtazin, an analyst at Moscow-based Mobile Research Group.

Russian consumers, attracted to the iPhone 5’s longer battery life, bigger display and new design, may snap up at least 50,000 units of the phone before its official release in the country, Murtazin estimates.

The iPhone 4S, introduced last year, sold for about 80,000 rubles in the Russian gray market, according to Moscow-based research firm Telecom Daily.

Unofficial Channels

The gray-market businesses send people to buy iPhones in stores abroad and bring them to Russia as personal belongings to avoid paying taxes required from an official importer.

While there are 2 million iPhones in use in Russia, only 1.1 million of those have been sold via official channels in the country, according to an April presentation by Euroset, Russia’s largest handset retailer.

That means gray-market phones account for about half of units and even more of the market in terms of value, given that the unofficial sales often happen at “astronomical prices,” Murtazin said.

OAO Mobile TeleSystems (MBT), Russia’s largest wireless carrier, and rival VimpelCom Ltd. (VIP) are testing smaller iPhone SIM cards -- the small chips that are inserted into phones to make them work on a certain network -- and may provide them for devices brought from abroad.

“If an individual buys an iPhone abroad, he needs the service here and we can’t leave him without the SIM,” said Valeria Kuzmenko, a spokeswoman for OAO Mobile TeleSystems.

Availability Gap

Apple is working on decreasing the lag between starting new smartphone sales in the U.S. and Russia, re:Store’s Zavyalov said in an interview. The lag has already been reduced to 2 1/2 months for iPhone 4S from eight months for some previous models, he said. The gap is caused by longer certification process for smartphones in Russia, Zavyalov said.

Apple may start direct sales of its gadgets to retailers in Moscow and St. Petersburg next year and is considering opening its own store Russia, Kommersant reported Aug. 20.

“This may help to decrease the gap in deliveries between Russia and the developed markets to several weeks,” Murtazin said. “In this case, many Russians will be glad to switch to officially brought iPhones to get the producer’s warranty.”

To contact the reporter on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

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