The iPhone and the I Ching
Rumors keep swirling that Apple (NAS: AAPL) will finally provide the iPhone to China Mobile (NYS: CHL) with its 621 million subscribers. A no-brainer deal for Apple, right? But China Mobile's chairman, Wang Jianzhou, was able to say nothing more definite on Thursday than "We discussed this issue with Apple. We hope Apple will produce a new iPhone with TD-LTE. We have already got a positive answer from Apple."
Why isn't Apple jumping at the opportunity to sell potentially tens of millions more iPhones? The reason comes down to technology.
China Mobile wants to use the iPhone with its 4G TD-LTE network. But last April, Apple's then COO, Tim Cook, said that installing the first generation of the LTE chipsets in the iPhone required making too many design compromises. There are also concerns about poor battery life in first-generation LTE phones.
And there are issues with China Mobile's version of LTE. TD-LTE, a standard used in Asia, is not compatible with just plain LTE. This further complicates integrating a 4G LTE iPhone (if and when there is one) into China Mobile's network.
Right now, the only wireless carrier in China to offer the iPhone with 3G service is China Unicom (NYS: CHU) , the country's third-largest carrier. It has over 25 million iPhone subscribers on its 3G W-CDMA network.
China Mobile does have 8.5 million noncontract iPhone users, but they must Web-surf using the company's slower 2G network and Wi-Fi hotspots.
China Telecom (NYS: CHA) , the country's second-largest carrier, already has a 3G-capable CDMA network, one similar to Verizon's (NYS: VZ) . It, too, has been lobbying hard for the iPhone. It has even gone so far as readying a $235 million campaign to advertise that it will be taking iPhone 5 pre-orders later this month. It should be noted that there has been no official notification from Apple that China Telecom is actually going to get the iPhone.
Apple is in an enviable position here with this huge emerging market clamoring for its goods. And even though the large majority of China's population probably couldn't afford to buy an iPhone at an unsubsidized price, as fellow Fool Eric Bleeker points out, there are plenty of folks in the larger cities who do have the necessary income.
Year over year, Apple's sales in China, Hong Kong, and Taiwan have increased over six times. So when CEO Tim Cook said that Apple has just scratched the surface of opportunity in China, that is a very conservative statement.
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At the time this article was published Fool contributor Dan Radovsky does not own stock in any of the mentioned companies. The Motley Fool owns shares of China Mobile and Apple. Motley Fool newsletter services have recommended buying shares of Apple and China Mobile. Motley Fool newsletter services have recommended creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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