Apple Inc.'s (AAPL) Fortune In China On The Rise As China Mobile (CHL) And Rival Carriers Compete On Pricing

on January 07 2014 10:25 AM
China iPhone 2013 2
A man talks on an iPhone in Beijing, 2013. Reuters

Rival carrier companies are hoping to compete with China Mobile (NYSE:CHL) by slashing iPhone prices, which along with Apple Inc.'s (Nasdaq:AAPL) own price cuts for iPads and MacBooks ahead of the heavy shopping season of Chinese New Year, will likely drive short-term sales for the company.

China Mobile, Apple’s latest and last major carrier partner in China, began taking iPhone pre-orders on Dec. 25, and the first two days following that saw about 100,000 units of the iPhone 5S ordered with a contract with the carrier, while another 150,000 units of China Mobile’s unlocked iPhone 5S were pre-ordered through other channels, the China Daily reported.

The numbers were more impressive when China Telecom Corporation Limited (NYSE:CHA) and China Unicom Limited (NYSE:CHU), the other two major carriers in China, began taking pre-orders for the iPhone 5S earlier in the year, with 150,000 and 120,000 units ordered in the first two days, respectively, with a contract, while both companies received about 400,000 to 500,000 unlocked iPhone 5S pre-orders in those first two days. 

China Telecom slashed prices for the iPhone 5S on Monday, in reaction to the Apple-China Mobile alliance. A 16-gigabyte iPhone 5S with a monthly minimum service fee of 189 yuan ($31.23) now costs just 4,488 yuan, 800 yuan less than before, while the same handset with a monthly minimum of 289 yuan now costs 4,000 yuan, 1,288 yuan less than before.

"China Telecom's move will essentially have a negative impact on the sales of China Mobile's versions of iPhone devices," said Sandy Shen, an analyst with research firm Gartner Inc., according to the China Daily. China Mobile, with a subscriber base of more than 760 million, is the biggest carrier in China.

Telecom’s price cut along with future competitive measures may take away some buyers from China Mobile, but overall, Apple can look forward to a rise in iPhone sales as a result, from the current rate of 2.7 million to 2.8 million units per month to perhaps 2.9 million per month, said Zhang Jun, an analyst with Wedge Partners, an independent equity analysis company.

China Mobile has not yet announced prices and subsidy packages for its iPhone offerings.

Apple will also launch a special shopping day for Chinese consumers on Friday, offering special discounts for iPhone, iPad and likely MacBook products. In 2013, a similar Apple sale ahead of Chinese New Year saw MacBook products drop 700 yuan, while prices of an iPad 4 were lowered by 300 yuan.

On Friday, Apple will also open its fourth flagship store in Beijing, the 10th Apple store to open in mainland China, China Daily reported. 

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