China And Russia are home to nearly half of the world’s mobile device users, so why have no deals been finalized?
While unauthorized sales of iPhones continue to flood throughout both Russia and China, Apple appears to be in no hurry to to finalize deals with operators to carry the device. Despite the iPhone being set for launch in 49 more countries later this year, including a few that would not seem to fit the market, China and Russia, home to nearly half of the world’s mobile users are surprisingly still absent from the list.
Mobile carriers in both countries have been hesitant to hand over revenues to Apple. Talks with China Mobile, the country’s largest mobile operator have been halted due to this reason. They claim that Apple has since dropped its insistence on revenue-sharing, yet has not managed to finalize any timetable for launch.
Traders importing iPhones into these countries are often purchasing them in the U.S. which only adds to Apple’s sales in this market, while costs are remaining rather minimal.
“Right or wrong, Apple needs to show good sales volumes. Russia is extremely profitable for it, all the more so because an iPhone shipped from the U.S. market is not serviced under warranty. That saves Apple around $70 per unit,” says analyst Eldar Murtazin at Mobile Research Group in Moscow. Yet many feel that Apple is still losing out.
“While having the cracked phones certainly helps Apple with marketing because of the buzz factor, they are losing a lot of money,” says Shaun Rein, managing director of China Market Research Group. “Since the revenue split is a huge part of the profit … it is critical that Apple begin to sell in China.”
In-Stat China analyst Kevin Li told Interfax this month, that there may be as many as one million unlocked iPhones currently being carried on China Mobile’s network. Some estimates indicate that nearly 40% of all unlocked iPhones are in China.
Russia’s monthly estimated sales of unlocked iPhones is about 20,000, while not nearly the figure present in China it still makes up a significant amount.
“China and Russia in terms of the black market in iPhones are probably the two top markets,” says Andy Hargreaves, analyst at Pacific Crest Securities, adding that concerns over piracy of music and other content was likely also a big issue for Apple.
The iPhone 3G is eagerly anticipated in both countries, despite the fact that many users will not even be able to take advantage of many of the 3G’s features. Russia issued licences for 3G last year and the service is so far available only in a few cities, while in China there is no usable 3G standard at all.
Rein says: “Consumers want the hot factor, not so much the 3G part because they cannot use it.” He says some status-obsessed Chinese buyers will hand over more than a month’s salary for a cool phone, while in Russia old iPhone models can sell for as much as 25,000 roubles ($1,081) – more than three times the carrier-subsidised U.S. price.
So when will the iPhone 3G actually be available in these countries? Well, that is tough to determine exactly. Pacific Crest’s Hargreaves says: “I would expect a deal in China probably in the next six months or so. Having a deal in Russia is probably a lot less likely because the market is so fragmented.”
