As an Apple Apple shareholder I would like to see a China Mobile China Mobile deal sooner rather than later but I have my doubts that it will occur any time soon. The reasons for this include China Mobile’s reluctance to agree to Apple’s terms, China Mobile customers buying iPhones and hacking it onto its network, its ability to grow its customer base with the iPhone and not having a 4G network.
China Mobile is a huge opportunity for Apple since China Mobile has over 735 million subscribers and it has the largest number of 3G subscribers. Umeng estimates that there are over 300 million 3G users on the China Mobile (129 million), Chine Unicom (96 million) and China Telecom China Telecom(88 million) networks vs. 175 million a year ago. It estimates that there are over 160 million Android users with 80 million plus on iOS.
China Mobile and Apple have been negotiating for years
There has been widespread speculation of an Apple/China Mobile deal over the past few years. While at times China Mobile has said that it wanted to wait for updated technology at other times it has been business model issues (read subsidies and minimum order quantities) from reaching a deal.
In a recent note Wedge Partners’ Brian Blair said that he expects a low-end iPhone to utilize TD-SCDMA and be launched in the second half this year with 10 million in the first production run. Katy Huberty at Morgan Stanley wrote in May that she expects an Apple/China Mobile phone by the end of the year which could triple Apple’s potential smartphone market in China.
Over 25 million China Mobile customers may already have iPhones
In October 2011 China Mobile reported that there were over 10 million iPhones on its network and it updated the number to 15 million in March 2012, or about one million added per month. I have not seen an official update but it would not surprise me that there could be 25 million China Mobile subscribers using iPhones.
China Mobile has also seen good growth in its customer numbers. It continues to add an average of five million new subscribers per month and has seen an acceleration of 3G subscribers this year. Its 3G customer base was 51 million at the end of 2011, 88 million at the end of 2012 (an increase of 37 million) and was over 129 million at the end of May (an increase of 41 million in just five months).
Given this large adoption of iPhones and upturn in 3G subscribers it doesn’t appear that China Mobile needs to agree to Apple’s terms.
There have been technical limitations to China Mobile’s network
China Mobile uses a proprietary network architecture, TD-SCDMA, which has limited iPhone users to 2G speeds. While users can get around the limited speeds by using WiFi for more data intensive apps this does limit the usefulness of a smartphone.
Qualcomm’s newest chipset supports TD-SCDMA. However it is the first version to do so and China Mobile and/or Apple may want it to get implemented on other carriers to shake out the bugs before it rolls out on China Mobile’s network.
Since China Mobile’s TD-SCDMA runs at 3G speeds it could turn out that a China Mobile iPhone may not launch until its TD-LTE 4G infrastructure is in the midst of rolling out. While China Mobile has done some 4G testing in smaller cities it only recently launched a 4G trial in Shanghai with 5,000 customers. It appears that it will be at least a year if not longer until its 4G network is broadly available.
Who needs an iPhone more? Apple or China Mobile?
Why China Mobile May Not Partner With Apple – Forbes
apple – Google News