Apple’s (NASDAQ:AAPL) latest iPhone will finally be offered by mobile carrier China Mobile (NYSE:CHL) after it signed a deal with the Cupertino tech giant. China Mobile is expected to see a good boost in its sales particularly after its newly deployed 4G LTE services. The Chinese carrier is estimated to sell approximately 2-3 million
iPhones in the next two weeks, benefitting from the Lunar New Year in the second half of the month.
But, in all this, Apple is going to be the biggest gainer as the other two rival iPhone carriers in the mainland are slashing prices to compete with the new entrant, China Mobile, to keep the sales momentum going.
Leaving the bad behind
2013 has not been that good a year for Apple in China, as the company faced different sets of challenges which adversely affected its image in the country. In fact negative publicity of the company had put a blemish on its image and made brand conscious Chinese population keep the iPhone at arm’s length. In the meantime, local smartphone makers launched several low priced smartphones which again squashed iPhone sales last year.
- Warning! GuruFocus has detected 5 Warning Signs with AAPL. Click here to check it out.
- AAPL 15-Year Financial Data
- The intrinsic value of AAPL
- Peter Lynch Chart of AAPL
Despite such dismal results, Apple chose to formally release the iPhone 5s and 5c in China on the same day as the global release. The response for the newly released iPhone was decent, but it was mildly impacted by the negative image of the company. However, now things seem to be changing for the global tech giant in the mainland.
The latest Apple carrier China Mobile started taking pre-orders for the iPhone from December 25 last year and saw an incredible response of 100,000 units for iPhone 5s in the first two days itself. The pre-order number is pretty decent particularly as the economy already has two major carriers selling the smartphone from before. Additionally, China Daily reported that the mobile operator received pre-orders for 150,000 units for the unlocked version of the handset.
The numbers were even better for the other two iPhone sellers, China Telecom Corp. (NYSE:CHA) and China Unicom (NYSE:CHU), after they too started taking pre-orders for the smartphone in anticipation of heavy sales ahead of the Chinese New Year. China Telecom and China Unicom saw a total pre-order of 150,000 and 120,000 units respectively in the first two days. In addition to taking pre-orders, China Telecom slashed the prices of the iPhone to draw more buyers. The 16GB version of iPhone 5s would cost 800 yuan less which is just 4,488 yuan.
Increased competition among carriers – boon for the iPhone maker
Although China Mobile is a late entrant in the iPhone 5s and 5c market and may have lost the initial mass of buyers, yet sales volumes for the iPhone is estimated to be quite good given the company’s subscriber base of over 750 million. This massive customer base offers China Mobile as well as Apple a new pool of potential buyers. Sensing the forthcoming competition from the new supplier, both China Telecom and China Unicom are heavily promoting, cutting rates and offering attractive packages to lure customers and effectively contend with China Mobile.
This is just the start of the price war to gain market share. China Telecom is giving the most aggressive price cuts to the customers by giving a 24% discount on the price of the iPhone. In contrast Unicom is offering a 15% price cut to its buyers. China Mobile has not yet come out with its price plans.
The three carriers are currently engrossed in a price war to save and gain market share. It’s just a matter of time to find out the market share gainer and loser. However, one thing is for sure, in all this Apple is making hay. The price cuts and other promotional offers shall bolster Apple’s sales in China in a big way. It would give the Cupertino hero the much needed sales boost in the budding economy where the average spending is increasing with the increasing disposable income of the middle class section of the population.