Telecoms stalwart China Mobile (
0941.HK; NYSE: CHL) and up-and-comer Xiaomi are creating new buzz in the sector these last few days, as speculation builds that the former may be near a long-awaited deal with Apple (Nasdaq: AAPL) to finally offer the iPhone on its network. Meantime, Xiaomi is making headlines with word that it expects its revenue to double this year, following a strong reception for Hongmi, its latest smartphone that retails for just 799 yuan (HK$1,004) or about $130.
Both of these stories reflect the growing importance of China to the global smartphone market, as the nation gets set to pass the US this year to become the world's largest market for phones optimized for web surfing and other data functions. Apple has been in the China smartphone market for the last few years through iPhone tie-ups with the nation's two smaller mobile carriers, China Unicom (
0762.HK; NYSE: CHU) and China Telecom (
0728.HK; NYSE: CHA). But those two companies control just a third of the market, with China Mobile dominating the other two-thirds.
I remember first reporting on iPhone talks between China Mobile and Apple back in 2010, as a deal would clearly be beneficial to both companies. But technological issues caused those talks to stall, mostly because China Mobile's 3G network uses a homegrown Chinese technology not supported by Apple. That obstacle seemed to be fading late last year, when Apple's main chip supplier, Qualcomm (Nasdaq: QCOM)
finally developed a chip that could support the homegrown Chinese 3G standard.
Speculation of a coming iPhone deal grew as rumors emerged that Apple was planning its next iPhone launch next month, and CEO Tim Cook made a trip to China where he visited China Mobile headquarters. Now China Mobile has
just released its latest quarterly results, which were predictably underwhelming with its profit up a meager 1.5 per cent in the first half of the year. Reporters took advantage of the presence of high-level executives at a press conference to discuss the results to ask about the iPhone rumors, getting mostly ambiguous answers.
Chairman Xi Guohua would only say that negotiations are still in progress and there are still some technical and commercial issues to be resolved. But I would be very surprised if the pair don't finally announce a deal in the next three weeks before the next iPhone launch, and would expect China to finally be included for the first time in the global debut for an iPhone.
From China Mobile let's look quickly at Xiaomi, which has risen to prominence in the last two years on the strength of its trendy, mid-range smartphones sold mostly over the Internet. Xiaomi joined the recent low-end smartphone frenzy with the roll-out of its Hongmi earlier this month, and said the model sold 100,000 units in the first 90 seconds of an online promotion as it received orders for a hefty 7.45 million of the phones.
