After years of going back and forth, China Mobile is finally launching the iPhone, which means an additional 763 million people locked into the world’s biggest carrier’s network will be able to purchase an iPhone 5s or an iPhone 5c.
But the deal can easily become a double-edged sword for China Mobile: Some analysts, cited by Reuters, forecast a subsidy war as wireless players compete with each other to attract customers — see China Telecom’s sale.
“I don’t see a price war coming where Apple is engaged in the war, but I do think you’re going to see a subsidy war coming,” said Michael Clendenin, managing director of Shanghai-based RedTech Advisors.
“China Mobile, if they’re not making their targets on sales for these phones, they’re going to increase the subsidies… It’s like airlines: the other guys will fall like dominoes, so China Unicom will do it and China Telecom will do it.”
To put that into numbers: While iPhone sales are expected to grow to 12 million units in 2014, its subsidies will leap 57% to 42.4 billion yuan, up from the 27 billion reported for fiscal 2013, according to Cynthia Meng, a Jefferies analyst.
Those interested in an iPhone, however, could purchase one from the grey market and use it on China Mobile’s network, and there are a few: According to its spokeswoman, the carrier already has 45 million iPhone users in China.
The 1.3 million iPhone pre-orders come on top of that number, although “Reuters checks showed that there were multiple registrations using fake ID numbers.” By comparison, the iPhone 4s launched on China Telecom with 200,000 pre-orders, while China Unicom recorded 100,000 iPhone 5 pre-orders on the first day of availability in 2012.
Analysts are afraid of cannibalization for sales to China Unicom, China Telecom, and the grey market and say that the real impact will be made by the next-generation iPhone. It still remains to be seen whether or not Apple will answer the demand for a bigger screen this year.
