Apple Offers New IPhones For China’s Two Smaller Carriers

Apple Inc. is offering its newest iPhones through China’s smaller wireless carriers and has yet to announce a deal with China Mobile Ltd., which has a customer base more than twice the size of the U.S. population.

The 5S and 5C models are being released for the networks of China Unicom (Hong Kong) Ltd. and China Telecom Corp. starting this month, Apple said on its China website after the handsets were unveiled by Chief Executive Officer Tim Cook. China Unicom, the second-largest domestic carrier, and No. 3 China Telecom already sell Apple handsets, with both operators dwarfed by China Mobile.

The agreements will make Apple’s new smartphones available to about 37 percent of China’s 1.2 billion wireless subscribers as it competes with domestic rivals including Lenovo Group Ltd., ZTE Corp. and Xiaomi Corp. The 5C will start at 4,488 yuan ($733) and compete with handsets sold for as little as $100 that helped erode Apple’s market share to 5 percent in the second quarter from about 9 percent a year earlier.

“It’s not cheap enough,” Tucker Grinnan, a Hong Kong-based analyst with HSBC Holdings Plc., said of the iPhone 5C in an interview with Bloomberg Television today. “We are disappointed with the price point. It is a high-end phone in China.”

Xiaomi Handsets

Shares of China Mobile fell 0.8 percent to HK$87.15 in Hong Kong trading, while China Unicom rose 1.5 percent and China Telecom fell 1.7 percent.

The iPhone 5C will be priced between 4,488 yuan and 5,288 yuan, Apple said on its website. Grinnan said he had anticipated the new devices would cost between 2,500 yuan and 3,000 yuan.

The iPhone 5S will cost between 5,288 yuan and 6,888 yuan.

Xiaomi’s newest handset costs 1,999 yuan. Lenovo’s flagship K900 IdeaPhone sells for 3,299 yuan.

“The iPhone will still be a premium product in China,” Anand Ramachandran, a Hong Kong-based analyst with Barclays Plc., wrote in a report yesterday. “China Unicom and China Telecom’s strategies have moved to harness higher mass-market smartphone adoption and usage momentum rather than fighting for premium share alone.”

Cupertino, California-based Apple is close to securing a deal with China Mobile and is preparing to ship iPhones to the carrier, a person with knowledge of the matter said last week.

Network Approval

The current iPhone, which isn’t compatible with China Mobile’s homegrown third-generation network, can make calls using the carrier’s 2G network and surf the Web using its Wi-Fi hotspots. Those users must pay full price for an unlocked iPhone, while China Unicom and China Telecom customers can buy subsidized handsets.

Apple unveiled the new handsets at an event in Beijing today, the first time China has been included in a global product release by Apple. The event was a rebroadcast of the earlier U.S. event with Chinese translation.

Apple spokeswoman Carolyn Wu declined to comment on the status of talks with China Mobile. Rainie Lei, a Hong Kong-based spokeswoman for China Mobile, said she had “no news” on the status of talks with Apple.

China’s Telecommunications Equipment and Certification Center, under the Ministry of Industry and Information Technology, as of Aug. 30 had approved for service an Apple handset that could run on a 4G TD-LTE network as well as China Mobile’s 3G network, according to a statement on the regulator’s website.

Rural Markets

China is one of Apple’s largest markets, generating about $25 billion in the past four quarters, yet sales there fell 14 percent last quarter. A low-cost handset will help the company boost sales in rural areas, where more than 650 million people live, according to government data.

China Mobile’s 745 million wireless subscribers accounted for 63 percent of the nation’s users as of the end of July, according to data compiled by Bloomberg. China Unicom had 266 million subscribers and China Telecom 177 million.

China Unicom began offering the iPhone in November 2009, and China Telecom followed in March 2012.

Making the iPhone available through China Mobile will be critical for Apple’s campaign to regain market share, said Jan Dawson, chief telecommunications analyst with the New York office of London-based researcher Ovum. Samsung Electronics Co. is the top smartphone seller in China, followed by Lenovo, researcher Canalys said.

“It’s key for Apple to be able to find ways to drive growth at a higher rate again,” Dawson said in an e-mail before the announcement. “Getting China’s biggest carrier on board and launching a cheaper version of the iPhone are both key to doing that.”

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