Apple Inc. (NASDAQ:AAPL) and China Mobile Ltd. (NYSE:CHL) (HKG:0941) may have finally entered into an agreement to offer the iPhone on the latter’s network, says a report The Wall Street Journal citing a source familiar with the situation. The deal will help Apple to gain major traction in the world’s largest mobile market.
Apple would gain over low cost rivals
China Mobile Ltd. (NYSE:CHL) (HKG:0941) would start selling the iPhone around December 18, which is the date of its conference in Guangzhou, according to two sources acquainted with the information.
China Mobile Ltd. (NYSE:CHL) (HKG:0941) is one of the biggest network carriers in the world, but up to now was not offering the iPhone. Apple Inc. (NASDAQ:AAPL) would get wider access to Chinese customers after it rolls out the iPhone on the China Mobile network. The customer base of China Mobile is seven times the size of Verizon Mobile, the largest U.S. network carrier. Apple earns major revenue from Greater China including Hong Kong, which is its third-largest market after the United States and Europe.
So far, local players have restricted Apple Inc. (NASDAQ:AAPL) from gaining major traction as these rivals have adopted the low-cost smartphone strategy. However, now Apple could capitalize on the deal and earn major revenue from China, in a scenario when revenue growth in the United States has slowed.
According to research firm Trefis, around 1.5 million iPhones are expected to be sold per month on China Mobile, which will total to around 20 million additional iPhone activations in 2014.
Finally, deal in sight
In September, the WSJ reported that Apple Inc. (NASDAQ:AAPL) was gearing up to offer its next-generation iPhone 5S and iPhone 5C models on China Mobile.
Apple Inc. (NASDAQ:AAPL) and China Mobile have been in talks over the past couple of years, but Apple was hesitant in rolling out its iPhone on the network due to the poor 3G network of China Mobile.
Contrary to China Mobile Ltd. (NYSE:CHL) (HKG:0941), smaller rivals such as China Unicom Hong Kong Ltd have been selling the iPhone since 2009, and China Telecom Corp started selling the iPhone in 2012. However, in terms of subscriber base they are far behind China Mobile.
According to the analysts, Apple Inc. (NASDAQ:AAPL) is speeding up its penetration into China Mobile’s massive potential iPhone buyers to compete with the likes of Samsung Electronics.