We reported yesterday that Apple Inc. (NASDAQ:AAPL) chief executive Tim Cook was recently on a secret trip to China to discuss business opportunities with Chinese telecom operations. The World’s largest telecom operation China Mobile Ltd. (NYSE:CHL) (HKG:0941) officially confirmed the reports in an email sent to Paul Carsten and Lee Chyen Yee of Reuters.
Cook worried as Apple’s Greater China sales slump
China Mobile Ltd. (NYSE:CHL) (HKG:0941) is the only major Chinese telecom operator that doesn’t offer Apple Inc. (NASDAQ:AAPL) products. However, China Mobile Ltd. (HKG:0941) (NYSE:CHL) network does have 10 million iPhone users. Tim Cook met China Mobile Ltd. (NYSE:CHL) (HKG:0941) chief Xi Guohua in Beijing to discuss business cooperation. Apple Inc. (NASDAQ:AAPL) reported a 43 percent decline in Greater China sales for the April-June quarter. Greater China includes Hong Kong and Taiwan as well. Cook wants to revive sluggish sales in Apple’s most important market.
China is a crucial market for the Cupertino, California-based company. Apple Inc. (NASDAQ:AAPL) wants to expand the iPhone and iPad’s reach to as many customers as possible. Stiff competition from ZTE Corporation (SHE:000063), Lenovo Group Limited (OTCMKTS:LNVGY) (HKG:0992) and LG Electronics Inc. (KRX:066570) (KRX:066575) has become a headache for Apple Inc. (NASDAQ:AAPL), whose products are much more expensive.
A deal could change fortunes of Apple and China Mobile
The discussion with Xi Guohua could prompt China Mobile Ltd to join hands with Apple Inc. (NASDAQ:AAPL) to distribute iPhones and iPads on its strong network. It will benefit both companies. Reuters says that only 20 percent of China Mobile Ltd. customers use 3G, much lower than 50 percent of China Telecom Corporation Limited (NYSE:CHA) (HKG:0728) and 38 percent of China Unicom (Hong Kong) Limited (NYSE:CHU) (HKG:0762). It has affected China Mobile Ltd.’s earnings because customers now prefer to use messaging apps like WhatsApp and WeChat rather than SMS messaging. Analysts believe that a deal to offer iPhones will attract more 3G users to China Mobile Ltd. (NYSE:CHL) (HKG:0941).
A deal between Apple Inc. (NASDAQ:AAPL) and China Mobile Ltd. (NYSE:CHL) (HKG:0941) could boost profits of both companies as faster Internet speed and wider product distribution will attract new customers. Chinese government plans to issue 4G licenses by the end of this year, which will be icing on the cake.
Apple Inc. (NASDAQ:AAPL) shares were down 0.53 percent to $450.92 at 11:11 AM EDT.