China Mobile to Sell iPhones on Jan. 17

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Dec. 23 (Bloomberg) -- China Market Research Group Founder Shaun Rein discusses China Mobile's plans to sell iPhones in China on Bloomberg Television's "The Pulse." (Source: Bloomberg)

Before and he was saying, beef -- because the price point is so high, it is great that they secured the deal, but we look not see margins are sailed anything like in the u.s. it is great to be here.

It is actually not about price.

If you take a look at it, the iphone 5s has outsold the 5c in china because the apple products have always been the aspiration, must have project -- products for the chinese.

It gives them access to 759 million mobile subscribers.

China mobile controls about 62% of the market.

This is key for apple.

The real challenge is that only 20% of china mobile users actually use 3g. most of them are still using the 2g network.

It will be critical for apple and china mobile to convince most of the user base to leapfrog over 3g and go to 4g, which will be released in january 2014. this is going to be very difficult because most chinese subscribers do not like to sign multiyear deals with carriers.

They prefer to buy cards, where they buy seven dollars or a dollars worth of phone cards and when they are done using it, it will buy another.

It is not as great a game changer as a lot of people think , but it is a good step for apple.

How good a step?

It took a long time to get this deal to bed.

You kind of wonder who has come out on top.

Give us your assessment.

That is a great question.

I think apple is five years too late to doing this.

China mobile was the dominant player five years ago, but their market share has gone from 70% to about 62% over the last three years.

Apple itself saw $23 billion of u.s. sales in last year.

In china, that was double from the year before.

This year, they flatlined.

They have been losing to samsung at the high-end, and they have been losing at the mid and low end.

It will not be a game changer for apple.

We expect that they will sell 8,000,000-10,000,000 more handsets in 2013. the adoption will be very slow.

It will be a lot slower than many of the analysts were estimated -- were estimating.

This deal was more of a deal of -- you are not going to see many more new subscribers signing up for this.

Your company has worked with apple on their strategy in china in the past.

How exactly do the chinese use their phones?

A lot of chinese consumers like having to phones.

Apple is not the cool new thing.

It is not -- it is now samsung.

What is the positioning of apple in china?

That is a great point.

A year ago, apple was the must- have product.

Rich people wanted it.

Middle-class chinese who were aspiring wanted it.

I interviewed a girl making 250 u.s. dollars per month who had a $1000 ipad.

I asked her how she was able to afford it and she told me that she saved up for six months so that she could have it.

Apple products were the must- have product.

This year, people have been switching to the samsung galaxy at the high-end.

That is why i think you will see a lot of the early adopters are actually signed up for contracts on their 3g system.

The early adopters will not be able to switch to the iphone and this new system.

Nevertheless, there will be a lot more phones coming out of the supply chain.

Is the supply chain capable of renting this one up?

Are there going to be issues?

Apple has always had supply- chain problems in china because their products have been so popular in the west.

Typically, until this year, apple released new products in china six months after the united states.

What is key is that they will be launching this new iphone in january.

That will give them enough time to be able to manage the supply chain for the christmas season in europe and the united states and be ready, hopefully, for the chinese new year on january 17. chinese new year starts january 30 of 2014 and it is a time when the chinese do their biggest spending.

The supply chain will definitely be an issue, but they will hopefully be able to work to get it out.

It will also continue to face increased margin pressure.

China is no longer a key place to do business.

The salaries of the factory workers for apple suppliers in china continue to go up.

That is also negative for them on the supply-chain side.

Thank you so much.

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