Apple Reaches a Deal to Sell iPhones in China

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Dec. 23 (Bloomberg) –- China Market Research Group Founder Shaun Rein and Inmobi North America Vice President & Managing Director Crid Yu discuss the deal between China Mobile and Apple to start selling iPhones in China and what it means for both company’s bottom lines with Cory Johnson on Bloomberg Television’s “Bloomberg West.” (Source: Bloomberg)

To see you.

It is a great deal for apple.

Finally, they will be able to get access to china mobile's 69 million subscribers.

The problem is, a lot of analyst of the to realize it, only about 20% of their subscribers actually use three g. the vast majority still use the outdated two g service, so it's going to be very difficult for apple and china mobile to convince hundreds of millions of consumers to leapfrog and skip over using three g and go straight to the 4g system.

It must work on a 4g. it hasn't really been released yet.

They are hoping the technology will come out by the end of the month in the inner ring area.

That would be like saying you can have four services in downtown manhattan.

In greenwich village.

A lot of consumers will take a wait and see attitude about whether the system is stable because china mobile has been criticized and whether prices on the data packages are reasonable or not.

It is good for apple but it's not going to beat that 20 million handsets a lot of analysts are estimating.

He says only 20% -- that's 150 million people already in three g. forget all of those migrating to it.

What do you see as the likely benefit?

China is so massive that any small fraction is nothing to scoff at.

Some of the early estimates we are seeing anticipate 17 million new subscribers from this deal alone.

17 million is almost as big as the entire smartphone user base in spain.

That gives you a sense of how a tiny drop in the market share is a big thing for any hardware or software manufacturers area at a certain level, there is the migration -- i don't imagine you'll have fewer people or a smaller percentage of that user base on mobile, but how big can that migration be given the economics of china and the level of income of the vast majority of people?

This is a great question.

The number 100 million has been floated around as the potential new handsets for people as a result of this deal.

It's a much larger than the numbers we have seen.

I think it depends on the pricing of the handsets himself how much china mobile can subsidize amanda depends on the data plan and how well the 4g rolls out in china.

To give you a sense, china mobile has 40 million iphone users on its network and a network does not even support iphone functionality.

Even this a fraction of those users migrate to the five -- or upgrade from their illegal phone.

What do you make of that?

The reason why the numbers sound big but are not, most of the users are not signed up for long term data package like a three year long contract.

Most chinese workers prefer a pay-as-you-go card.

They are actually buying a lot of the expensive iphones because it is a prestige item.

All of these people might move to shanghai for six months or beijing for six months i network.

These people will never sign up for a multiyear contract for data plan or voice because they are based off of one city.

It's not like the united states read can take a phone from new york and moved to california and be able to keep the same phone number.

That is going to be a problem.

You brought up a good point rate a lot of people are only making about $5,000 a year.

These people are extremely price sensitive when it comes to a data plan.

They would like to have a handset to show prestige and status to outsiders, but they are price sensitive when it comes to the data plan.

You will see an 8 million to 10 million increase in sales.

People who want the iphone 5 in china pretty much already have it.

You will see a bump up when the newest iphone comes out.

I remember years ago, the star, had its own illegal approach and one was the inability of workers to take those cheap bones from one city to the next.

Do you think china mobile could change that policy?

Let me add to that point that might be of interest.

One is the rising of the upper middle class in china which is certainly expected to grow tremendously in the future.

I have not heard the press talk about but it's important to talk about it.

We have done insights about mobile user behavior and what we found in our proprietary study is the china mobile user is much more active on mobile than the act give first western world mobile user.

80% of china mobile users would have said yes that they made a mobile purchase versus 50% or 60% for the u.s. and germany.

Restates that.

A china mobile phone user is more likely, 60% more likely to do mobile app arch is this?

Also more likely to download apps.

In addition to the new users, they are gaining more active users.

Like that is really interesting stuff trade there are more legs to this story than i even thought.

This text has been automatically generated. It may not be 100% accurate.

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