By Nicholas Maithya
Deutsche Bank (NYSE:DB) analysts have revealed that, the Chinese government won’t be approving China Mobile Ltd. (ADR) (NYSE:CHL)’s pursuit for an Apple Inc. (NASDAQ:AAPL) iPhone 5 subsidy. The government’s disapproval of the proposed subsidy on Apple’s newest iPhone is because it believes that such a deal would be a huge burden to the government.
China Mobile had earlier indicated that it would extend the level of subsidy on handsets to 26 billion yuan, or $4.1 billion, from an initial Y21 billion. As of June 30th, the total subsidies on handsets for the network totaled 12 billion yuan. Chinese carriers are believed to incur some of the costs, in a bid toward fostering the number of contracts with smartphone users, which is then recouped over time.
China Mobile Ltd. (ADR) (NYSE:CHL) had hoped to get some love from the government, which could have resulted in a massive number of contracts for the new iPhone 5, but this seems unlikely for now. Consequently, Apple Inc. (NASDAQ:AAPL) may have to find other means of selling its device to China Mobile customers, the world’s largest carrier, with approximately 700 million subscribers.
Deutsche Bank analysts are quoted saying, “we believe that the stars are not aligned for a China Mobile licensing of the iPhone 5,” and added, “the government is not supportive”. The Chinese telecommunications giant is partly owned by the state government, and is at some length considered a monopoly, as it commands nearly three-quarters of business in the country.
The other two rivals, China Unicom (Hong Kong) Limited (ADR) (NYSE:CHU) and China Telecom, have already received approvals for subsidies on the new iPhone, and hold a significant number of subscribers altogether. Nonetheless, following the recent disclosure of the making of iPhone 5, it is clearly evident that Apple could still improvise the new device to run the 3G network for China Mobile customers, who currently are using the iPhone 4S on a 2G network.
China Mobile’s 3G network operates with a homegrown technical standard, which is not supported by the iPhone, but analysts believe that the new iPhone device could still be improvised to run on the network. The analysts are also of the opinion that a deal between the two companies is not likely to happen any time soon, while the Chinese telecommunication giant hinted that iPhone 5 is likely to debut in its network no earlier than January of next year.
On the other hand, China Unicom (Hong Kong) Limited (ADR) (NYSE:CHU) has revealed that it is likely to sell Apple Inc. (NASDAQ:AAPL)’s new iPhone device to its customers before the end of the year, with China Telecom optimistic of following up shortly. The new iPhone 5 recently cleared the first legal hurdle in china, after it received the mandatory regulatory certification in the country.
Nonetheless, Apple Inc. (NASDAQ:AAPL) could still sell the new iPhone 5 to China Mobile Ltd. (ADR) (NYSE:CHL) customers before the end of this year, through its online stores and brick and mortar shops. However, these would be unlocked devices, at the respective price tags.
The Next Web notes, “Apple could theoretically tweak the new iPhone to support China Mobile’s TD-SCDMA network and sell units to the carrier’s customers, from its Apple Stores at full price”.
Furthermore, there are millions of customers who would be willing to purchase an unlocked iPhone 5 to use in China Mobile’s network, although, in the long run, Apple Inc. (NASDAQ:AAPL) would still need to sign on with China Mobile for a subsidized deal on Apple’s latest iPhone device, in order to, fully saturate the market.
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