Apple Inc. Barriers To China Mobile Deal Disappearing

Apple Inc. Barriers To China Mobile Deal Disappearing
ElisaRiva / Pixabay

Things are looking up for Apple Inc. (NASDAQ:AAPL)’s ability to cement a deal with China Mobile, the world’s largest carrier. Many investors see a deal with the carrier as being an important step in Apple’s ability to gain ground in the rapidly growing market.

Apple Inc. Barriers To China Mobile Deal Disappearing

Apple Chief Executive Officer Tim Cook met with the chief of China Mobile last month. The two were undoubtedly working toward the long-awaited deal that would give Apple access to 740 million more mobile subscribers.

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Apple expected to release low cost iPhone

Lee Chyen Yee and Yimou Lee of Reuters report that one of the key ingredients in a deal between China Mobile and Apple Inc. (NASDAQ:AAPL) is the long-rumored low cost iPhone. The company is expected to unveil the handset next month.

According to Reuters, Apple Inc. (NASDAQ:AAPL)’s use of chips made by QUALCOMM, Inc. (NASDAQ:QCOM) also give it a leg up in China because those chips will work on China’s networks, which are different than those found in other countries. So far the company has not signed a deal with China Mobile because it would have required that the iPhone be redesigned so that it could work on the carrier’s TD-SCDMA 3G technology.

The other big barrier to a deal between the two companies has been China Mobile’s hesitance to pay the large costs associated with subsidizing and marketing the iPhone.

4G licenses could help Apple

Chinese officials are expected to begin handing out 4G licenses by the end of this year, and China Mobile could be first in line to receive one of those licenses because of its size. Those licenses are expected to be based on TD-LTE technology, which by QUALCOMM, Inc. (NASDAQ:QCOM)’s chips are compatible with. As such, it would prevent Apple Inc. (NASDAQ:AAPL) from having to redesign the iPhone so that it would work on the carrier’s network.

Apple’s sales in China slumped by 43 percent in the June quarter compared to the March quarter as mid-range Chinese companies zeroed in on customers on their home turf. Apple Inc. (NASDAQ:AAPL)’s smartphone market share in the country has been almost cut in half since last year and is now under 5 percent, according to research firm Canalys.

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