Russian Mobile Operator MTS Won’t Offer Apple’s IPhone 5

Russian MTS Joins China Mobile to Keep Latest IPhone Off Shelves
OAO Mobile TeleSystems mobile phones sit on display inside the company's store in Moscow. Photographer: Alexander Zemlianichenko Jr./Bloomberg

OAO Mobile TeleSystems, Russia’s biggest mobile-phone operator, won’t offer the newest version of Apple Inc.’s iPhone for the first time since the handset went on sale in the country in 2008.

“We don’t have a contract with Apple currently,” said Valeria Kuzmenko, a spokeswoman for MTS, one of the two main iPhone distributors in Russia. The previous contract expired in October and the company won’t offer Apple’s iPhone 5 when the device goes on sale in Russia on Dec. 14. Kuzmenko declined to elaborate, citing a confidentiality agreement. Apple spokeswoman Irina Efremova said she couldn’t comment immediately.

MTS is another example of an emerging-market mobile-phone company that decided against selling the iPhone 5. China Mobile Ltd., the world’s largest mobile-phone company by users, this month said it wouldn’t add the iPhone without a deal that’s favorable for the Chinese company.

“Apple is seeking to pass on to operators not only the advertising costs in the country, but also logistics and repair costs,” said Denis Kuskov, head of St. Petersburg-based researcher Telecomdaily. “As a result, the operators either have to overprice the handsets or carry losses on these sales.”

OAO MegaFon, Russia’s second-largest mobile-phone operator, hasn’t been selling Apple devices since 2010, according to the company’s press office. The contract between Apple and VimpelCom Ltd., Russia’s No. 3 operator, expires in March.

Local Laws

MTS will still sell its remaining iPhone 4 devices from the previous contract. Its MTS Retail unit is retaining a contract to sell Apple’s iPad tablet computers.

Kuskov said it’s more difficult for Russian operators to sell some popular handsets with a profit as local laws ban them from subsidizing the gadget’s price by linking it to a subscribtion deal. As a result, retailers such as Euroset and Svyaznoy may become the largest sellers of the iPhone 5 in Russia, he said.

The device is still popular with the country’s customers. Since September, when Apple started selling the iPhone 5 in the U.S. and Western Europe, more than 100,000 of the handset have been brought to Russia, according to estimates by Telecomdaily.

The price for the 16-gigabyte model on the “grey market” in Russia has declined to less than $1,000 from as much as $3,700 in September, according to Eldar Murtazin, an analyst at Moscow-based Mobile Research Group. The official price may be higher than in the grey market, making it less attractive for operators to offer the device, he said.

Benefit Sharing

China Mobile Chief Executive Officer Li Yue told a developer conference in Guangzhou this month that technical issues related to the carrier’s homegrown third-generation network standard aren’t the only obstacles to reaching an iPhone deal with Apple.

“Besides the technical issues, the business model and benefit sharing still need further discussion,” Li told the gathering according to a transcript from the company.

China Mobile this month agreed to carry Nokia’s flagship smartphone Lumia 920T, giving the Finnish mobile-phone maker a boost as it’s trying to win back customers of Apple’s iPhone and devices using Google Inc.’s Android platform.

“The Apple’s star is falling,” Murtazin said. “The company used to dictate sales terms to partners, but with growing competition in smartphones, this is not possible anymore.”

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