Deal with China's No. 2 carrier makes sense because more of its customers are post-paid
August 28, 2009 01:58 PM ETComputerworld - Apple will sell somewhere between five and seven million iPhones in China in 2010 as a result of its deal with the country's second-largest mobile carrier, a Wall Street analyst said today.
The Chinese market will account for about 15% to 20% of Apple's worldwide iPhone sales next year, said Brian Marshall, an analyst with Broadpoint AmTech. "The upside for Apple is great."
Earlier today, China Unicom, the country's No. 2 carrier, announced a three-year agreement with Apple to sell the latter's iPhone, confirming rumors and reports that the two were nearing a deal. Last March, Web sites and bloggers reported that China Unicom had confirmed it would start selling the iPhone the following month, something that did not happen.
China Unicom has about 140 million subscribers, less than a third of the 460 million subscribers of China Mobile, the nation's largest mobile provider, said Marshall. Nonetheless, the No. 2 carrier in the country was still of interest to Apple, he added.
"What's interesting about China Unicom is that only about half of its subscribers are pre-paid customers, which is not the market that Apple is going after," said Marshall. "But about 80% of China Mobile's customers are pre-paid."
That put the two carriers on an almost-equal footing as far as Apple was concerned: China Unicom has about 70 million post-paid customers -- the kind that Apple wants - while China Mobile has approximately 92 million post-paid customers, Marshall estimated.
The close numbers "possibly" helped Apple make the decision to go with China Unicom, he said.
Another factor was that China Unicom has been aggressively building its 3G network, a necessity for the iPhone. China Unicom's 3G network, the only one of the three state-sanctioned carriers' that is compatible with the iPhone, will be in place by the end of the year, said the company's chairman and CEO, Chang Xiaobing, during a news conference today.
Under the three-year deal, China Unicom will start selling iPhones in the fourth quarter of this year. "With 70 million post-paid customers, and assuming flat sales, which are conservative, I think Apple will sell between five and seven million iPhones in China during 2010," said Marshall. He projects that Apple will sell 37 million iPhones worldwide in 2010.
"That means China will account for 15-20% of all iPhone sales next year," said Marshall, rounding up the actual numbers of 13.5-18.9% generated by his math.
Although neither China Unicom or Apple confirmed the reports, some media outlets, including the Wall Street Journal, said that the Chinese iPhone would lack Wi-Fi capabilities.
China Unicom did not spell out its iPhone pricing, but did say today that it will purchase the smartphones direct from Apple and offset some of the cost to customers by subsidizing part of the purchase price.
Nor did China Unicom say which model, or models, of the iPhone it will sell later this year.
Even so, Marshall was bullish on Apple's chances. "I see it as a big growth opportunity for Apple," he said.
Apple faces competition in China from other smartphones, including those built on Google's Android operating system, as well as BlackBerry devices from Research in Motion (RIM) and Palm's Pre. And China Mobile is working with Dell on mobile phone for the Chinese market.
On the Palm Pre front, China Telecom, the country's No. 3 mobile carrier by subscriber count, is in talks with Palm about offering that firm's newest smartphone in China.
source:.computerworld.com/s/article/9137230/China_will_account_for_15_20_of_all_iPhone_sales_in_2010_says_analyst
