Low Cost iPhone Positive for China: Grinnan

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Sept. 11 (Bloomberg) -- HSBC Regional Head of Telcom & Media Research Tucker Grinnan discusses the new iPhone's effect on Chinese Operators with Mark Barton on Bloomberg Television's "Countdown." (Source: Bloomberg)

They have released this cheap phone, the 5 c but some say it's not cheap enough.

What does this mean for its ambitions in china?

I would agree it's not cheap enough.

We are disappointed with the price point.

It is a high-end phone in china.

Their market share is now below 5% and there was an expectation that they would get closer to the 2500-3000 renminbi price point.

Jeremy -- x iaomi is in that price point and they will remain popular.

Today, apple has said they are going to focus on the high and for the moment moment in china.

The china mobile deal, tucker, has yet to be announced.

What will this mean for china mobile?

As you say, it is still on the high-end.

Does that mean that they have to subsidize the phone more?

China mobile has retained all of the high-end customers in china.

There is no affordability on the government has been delaying the introduction until china mobile has a viable broadband.

They have had higher problems with handsets and they have been encouraging high-end customers to bring the iphone to china mobile and sign up for wi-fi data services and to enjoy almost for free.

Wi-fi represents 75 cent of the data traffic.

They have the largest wi-fi network in the world yet it is only 2.7% of revenue.

The big opportunity with this deal would to be to bring the revenue on number can charge much higher for cellular services.

While china mobile has a lot of iphone customers, they do not have the cost or revenues associated with a true iphone contract.

What does it mean for the low-cost alternatives in china?

Will they be quaking in their boots?

In talking with the china operators, they suggest the sweet spot is more like 1000- 1800 rmb.

Some white box devices are as low as 50 u.s. dollars.

China is the largest smartphone market in the world than most players in the market are losing money.

Apple is trying to find a midpoint between rate of walmart in them market share and i think they missed it so far.

There is a big opportunity if they can get more down to the 300 dollars or $400 u.s. price target we initially heard about in the market was expect with this iphone 5 see.

Do think they are stubborn maintaining these prices at this level?

It will sustain the margin.

It's a tricky situation because one thing to highlight is much of the cachet of the benefits of being an apple user in more developed markets like the u.s. is the access to the content ecosystem, content management, and the app store.

We don't have that in china.

Most consumers are not used to paying for music or video.

I think apple is structurally challenged from a market share is.

I think a deal with china mobile would be a significant positive.

They do not have a tdlte network up yet which is what the government wants.

The technology is enabled in both of the new devices is very positive in terms of a attentional china mobile deal by the end of the year.

What about the other two who already have the iphone, china telecom and unicom.

How does this announcement affect their fortunes?

It will not have a tremendous impact.

China telecom has been very effect to that getting some high-end customers and we have seen them moving up but subsidies take a big low.

Last year, they're reported earnings dropped 10% largely because of iphone subsidies.

Unicom is in a more challenge position financially.

They are fre e cash flow negative.

They were the first to market with the iphone and they are focusing more on high-end devices.

The subsidy levels could be lower but without mobile number portability it's very difficult to take shares at the high-end in china.

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

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