Mainland mobile growth set to surge on expected Apple-China Mobile deal

PUBLISHED : Tuesday, 24 September, 2013, 8:02pm
UPDATED : Tuesday, 24 September, 2013, 9:39pm

Smartphone shipments on the mainland are predicted to exceed more than 450 million units next year, following the issuance of 4G mobile licences and an expected deal allowing China Mobile to launch new iPhones next year.

That would represent about a 25 per cent increase from the estimated 360 million units shipped this year, a report from technology research firm IDC said on Tuesday.

James Yan, a senior analyst at IDC China, said Apple’s share in the world’s largest smartphone market, which has declined dramatically in the face of strong competition from Samsung Electronics and popular mainland brands, “is expected to remarkably improve with the launch of the new iPhones” on China Mobile’s network”.

China – comprising the mainland, Hong Kong and Taiwan – is Apple’s second-biggest market after the United States. Apple earlier this month staged a satellite event to introduce its new flagship iPhone 5s and lower-priced iPhone 5c in Beijing within hours from the US launch at its headquarters in Cupertino, California.

Apple has long been in negotiations to add China Mobile, the world’s largest wireless network operator by subscribers, as a carrier-partner for the iPhone after China Unicom and China Telecom.

A report by Barclays said: “We see it as highly likely that an Apple-China Mobile partnership could be announced once 4G licences are issued in China and the timing on China Mobile’s commercial 4G service launch is clearer.”

Barclays expected Beijing to issue 4G licences by the end of this year. China Mobile, which had 750.415 million total subscribers at the end of last month, is expected be granted a licence to operate a high-speed 4G network based on the mainland-developed standard called time-division long-term evolution (TD-LTE).

China Mobile kicked off its 4G network expansion last month by awarding the bulk of contracts to Huawei Technologies and ZTE, the mainland’s two biggest telecommunications equipment manufacturers.

That tender, the financial terms of which was not disclosed, was for the build-out of about 207,000 TD-LTE base stations to cover the main districts of 100 major cities across the mainland.

With 190.2 billion yuan in capital expenditure budgeted this year, China Mobile said it planned to procure about one million TD-LTE mobile devices, including smartphones, this year.

IDC said Apple’s collaboration with China Mobile and the availability of a lower-cost iPhone will help drive the adoption of the iOS mobile operating system next year.

Both the iPhone 5s and 5c models support up to 13 different 4G LTE bands, more than any smartphone in the world. This includes the Beijing-backed TD-LTE standard.

Speculation has been rife that a deal between Apple and China Mobile was imminent after the technology giant received a so-called network access licence from the mainland’s Telecom Equipment Certification Centre for the iPhone 5s and iPhone 5c to be used on the operator’s 4G TD-LTE network.

Advanced 4G networks have theoretical internet download speeds of up to 100 megabits per second. The fastest existing 3G networks run at 42Mbps. The 4G standard called frequency division duplex long-term evolution (FDD-LTE) is the most widely adopted by 4G network operators worldwide.

On the mainland’s online Apple Store, prices for the iPhone 5c start at 4,488 yuan (HK$5,684) for the 16-gigabyte model, while those for the iPhone 5s with the same capacity start from 5,288 yuan.

A recent column on the Sina Tech website, which was reported in various online news sites last week, apparently showed how important it is for Apple to have China Mobile as a partner and significantly boost iPhone sales in the world’s second-biggest economy.

Citing China Mobile’s internal statistics, the Sina Tech column pointed out that the operator had 42 million iPhone users on its network.

Since most of those handsets were all likely purchased at high prices from the mainland’s grey market, the potential demand for upgraded iPhone models by subscribers through China Mobile could mean significant sales for Apple.

The iPhone currently remains incompatible with China Mobile’s 3G network, which is based on the mainland-backed standard called time-division synchronous code division multiple access (TD-SCDMA). The operator had 158.687 million 3G users at the end of last month.

That means China Mobile subscribers with iPhones use their smartphones on the operator’s existing 2G networks, either based on the enhanced data rates for GSM evolution (Edge) or general packet radio service (GPRS) wireless systems.

Technology research firm IHS has forecast Apple to ship 86.1 million iPhones in the second half of this year, up 25 per cent from 68.7 million in the first half. It said Apple’s estimated 154.8 million iPhone shipments this year could receive a boost if China Mobile started carrying the new models by the fourth quarter.