Apple Inc. is expected to announce new iPhone models on Sept. 10, but potential distribution deals with two of Asia’s biggest wireless carriers will prove to be far more important to its bottom line.
Apple is close to striking separate deals with China Mobile Ltd. and NTT DoCoMo, the biggest wireless carriers in China and Japan, respectively.
Announcement of the deals could be made as early as Tuesday, coinciding with Apple’s Sept. 10 event at its Cupertino, Calif. headquarters to introduce two new iPhone models—the 5S and a cheaper 5C aimed at the lower end of the smartphone segment and emerging markets.
Potentially Big Windfall
With over 700 million customers, China Mobile is the biggest wireless carrier in China. The potential arrangement, first reported by the Wall Street Journal, will significantly increase sales for Apple in the world’s biggest wireless market.
China Mobile has never carried the iPhone, which has not been as popular in the Chinese market as smartphones based on Google’s Android operating system. China’s No. 2 and No. 3 wireless carriers, China Unicom and China Telecom, do carry the Apple phone.
The potential deal comes at a critical juncture for Apple, which has seen its worldwide smartphone market share erode and during its fiscal third quarter ended June 29, revenues from Greater China fell 14 percent from a year ago.
Apple’s smartphone market share has also been on the decline, according to data from market research firm Canalys. Apple’s 5 percent market share is dwarfed by rival Samsung, which is the leader at 18 percent.
Apple will look to sell both the 5S and the 5C with China Mobile, as well as the older iPhone 4 at an even lesser price. The 5C will likely be the best seller in the Chinese market, where wireless carriers rarely subsidize cell phone purchases. The average selling prices of the iPhone 5 is around 5,000 yuan ($800), which is far higher than the typical Android-based smartphone retailing between 1,000 and 2,000 yuan.
With expected 5C pricing at between $250 and $350 per phone, Apple should see revenue increases of $8.8 billion to $12.3 billion annually at a conversion rate of 5 percent (based on 700 million total customers). That’s an 8 percent increase over its 2012 total sales for company.
Scooping Up Last Japanese Holdover
In a less hyped but equally important deal, Apple has agreed to distribute iPhones through Japan’s NTT DoCoMo Inc., according to Nikkei.
NTT is Japan’s biggest wireless provider, and has never carried the iPhone. Like China Mobile, NTT has been under discussion with Apple over the years but never reached an agreement. Two smaller wireless providers, KDDI Corp. and Softbank Corp., have been selling Apple phones for years.
It’s unclear how Apple has suddenly reached breakthroughs with Japan and China’s biggest wireless companies, ending years of impasse. The company may have eased up on its previous demands (made during the Steve Jobs regime) of sales guarantees and preferential marketing treatment, in the face of stiffer competition from Samsung.
But one thing is clear: top-line revenue is now paramount to Apple.
Frank Yu is a contributor to the Epoch Times.