Hard-line stance on terms pushes clients away from iPhone maker Apple

Service providers balk at iPhone firm's terms, blocking way to 2.8 billion potential customers

PUBLISHED : Tuesday, 07 May, 2013, 12:00am
UPDATED : Tuesday, 07 May, 2013, 4:26am

Apple is missing out on a chance to court as many as 2.8 billion new smartphone customers, many of them in Asia, as telecommunications service providers balk at conditions imposed by the iPhone maker and drag their heels in signing on as partners.

The US electronics giant has announced fewer than a dozen new service providers to sell the device since September 2011, leaving the total at about 240. Holdouts represent billions of would-be subscribers in countries such as China, Japan, India and Russia, said Horace Dediu, a market analyst at

Samsung Electronics, Apple's biggest smartphone rival, sells devices through almost all of the world's 800 carriers, Asymco said.

China Mobile, the world's biggest telephone company, and NTT DoCoMo, Japan's largest mobile carrier, are among providers that have not agreed to carry the iPhone, blaming either the high costs of subsidies needed to make the device affordable or other unacceptable terms.

The slowdown in adding new partners is contributing to stagnating iPhone sales growth, giving Samsung-led competitors a potential advantage and putting pressure on Apple to deliver a cheaper device or make other margin-threatening concessions.

"The narrative has been focused on the consumer demand, and the narrative needs to shift to the operator," said Dediu, a former in-house analyst for Nokia. "Apple has run out of the kinds of operators that will say yes to them."

As Apple sells fewer iPhones and more of its less profitable products, its gross margin has narrowed to 37.5 per cent last quarter from 47.4 per cent a year earlier.

Apple's dearth of new carriers was evident last quarter, when iPhone sales increased 7 per cent, to 37.4 million units, the smallest gain since the device was introduced in 2007 and much less than the 36 per cent growth for the total smartphone market, according to Strategy Analytics. In the same period a year earlier, iPhone sales jumped 88 per cent.

The iPhone slowdown has broad consequences for Apple, which gets more than half its sales from the product. Its shares have fallen 36 per cent since reaching a peak in September.

Before getting on board with Apple, new carriers must weigh the company's requirements, such as guaranteeing a minimum sales tally, as well as the price of the phone, above US$600 before subsidies.

The regions that present the biggest growth opportunities are developing nations such as China or India, where the price is often too high.

Apple has been developing a lower-end iPhone that may be introduced as early as this year, people familiar with the company's work have said. The firm has also been cutting the price of older iPhone models.