China Telecom Corporation Limited (NYSE:CHA) (HKG:0728) has announced subsidies on Apple Inc. (NASDAQ:AAPL)’s iPhone 5C and 5S, which is less by 15 percent than the earlier model, according to the analysts’ estimates. Buyers need to do an upfront payment of 4,488 yuan ($734) for the 16 GB iPhone 5C with any plan and 5,288 yuan for the 5S, according to information China Telecom Corp published on its website.
Additionally, the handset is free for buyers who take a two year contract with a minimum monthly plan of 329 yuan for 5C or 389 yuan for the 5S as the price in refunded as per the monthly usage.
Apple may feel the pressure
Apple Inc. (NASDAQ:AAPL) launched its latest iPhones in China on network carriers China Unicom (Hong Kong) ltd and China Telecom Corporation Limited (NYSE:CHA) (HKG:0728) on September 11th to gain some traction in the world’s largest mobile phone market. However, the company might feel pressure as the network carriers are not offering much support to the handset makers with subsidy costs, and also they are offering less expensive devices from domestic companies like Lenovo Group Ltd, ZTE Corp and Xiaomi Corp, according to Bloomberg.
“The plan is more conservative this time,” Eva Yip, a Hong Kong-based analyst at Sun Hung Kai Financial Ltd. “The handset subsidy as a percentage of upfront payment is less than that of the iPhone 5 plan,” Yip added.
According to Yip Jacky Yung, a Hong Kong-based spokesman for China Telecom, the carrier is providing subsidy of 2,890 yuan on iPhone 5S, which is 15 percent less than the 3,400 yuan for the iPhone 5 on the same plan (on a monthly plan of 289 yuan).
China Unicom may also follow China Telecom on subsidies
China Unicom (Hong Kong) Limited (ADR) (NYSE:CHU) has not yet come up with a similar announcement about the subsidy plans for the devices. The second largest network carrier in China may follow the same approach as that of China Mobile according to Cynthia Meng, a Hong Kong-based analyst with Jefferies Group LLC. She also wrote that both China Unicom and China Telecom Corporation Limited (NYSE:CHA) (HKG:0728) are more rational on price competition, and both are balancing between quantity and quality of new 3G subscriber development.
China Mobile Ltd. (ADR) (NYSE:CHL) is not in to any kind of distribution agreement with Apple for the iPhone.
