The mobile version of the iPhone comes to light; large-scale distribution faces subsidy awkwardness

The so-called "tao hu" (rich but tasteless) buddies are about to welcome the China Mobile version of iPhone. According to media reports, the iPhone 5S/5C supporting 4G network will be released in November. Among them, the mobile version of iPhone 5S fully supports China Mobile's 4G network (TD-LTE), with the highest download speed reaching up to 100M/s, which is 10-20 times faster than 3G, and also supports 3G, 2G networks, as well as global roaming. At that time, the long-term situation where China Mobile has no customized version of iPhone will be broken.

Although the China Unicom and China Telecom versions of Apple phones have already been launched, in the domestic market, China Mobile, with over 700 million users, may be the key focus for Apple to expand its cooperation with operators. For the operator, on one hand, it needs to make a commitment to high sales volume required by Apple, while on the other hand, the potential massive phone subsidies may lead to a decline in profit. Large-scale distribution may face subsidy embarrassment. It might not be the right time for China Mobile to launch the TD version of iPhone 5S/5C at this moment.

The long-awaited China Mobile version of iPhone is about to be "born"

As early as two months ago, the China Mobile 4G version of iPhone 5S/5C had obtained the network access permit and was qualified for sale in the domestic market. However, due to network and 4G license issues, it did not go on sale simultaneously with the Unicom and Telecom versions. Now, the overdue China Mobile version of iPhone is finally ready to meet consumers.

According to official background, the China Mobile 4G TD-LTE version of iPhone 5S/5C appeared on the MIIT website. From the certification information provided by MIIT, the models of the mobile version of iPhone 5S/5C are A1518 and A1516 respectively, both supporting the China Mobile TD-LTE/TD-SCDMA/GSM network. In terms of configuration, there is not much difference between A1518 and A1516 and the original version of iPhone 5S/5C. Both have a 4-inch retina screen, run on iOS 7 system, and come with 1GB RAM, etc.

Interpreting industry trends, Apple recently announced the recruitment of an operator engineering manager familiar with China Mobile's 3G and 4G networks; There were also reports that Guangdong Mobile had rushed to open 4G service reservations for Guangzhou and Shenzhen mobile users before the National Day... These moves were considered as preparations made by Apple and China Mobile for the TD version of iPhone 5S/5C, signaling their impending cooperation. Some analyses suggest that negotiations between Apple and China Mobile may have entered the final stage, possibly only needing to discuss issues related to pricing and marketing.

Looking at the market comprehensively, although China Mobile was the only one not selling iPhones previously, through gray markets and various indirect ways, China Mobile still has a large number of iPhone users. But this is a "double-edged sword", because for China Mobile, if users already own an iPhone running on a 2G network, how many would be willing to buy another new iPhone and switch to its 3G service?

From this inference, everything is ready for the China Mobile version of iPhone, and there should be little doubt about its release next month. IDC also predicts that if China Mobile starts selling iPhones, Apple's share in China's smartphone market will double this year by 2014. Apple intends to gain more new users through China's largest telecommunications operator.

The issue of phone purchase subsidies troubles China Mobile

At present, the release of the mobile version of iPhone seems to be a natural progression, but releasing the mobile version of iPhone also poses some awkwardness.

Firstly, considering market factors - other brands' high-end products are gradually catching up with Apple, and consumers' enthusiasm for iPhones is gradually cooling down. According to a report previously released by research firm DRAMeXchange, after launching the iPhone 5 at the end of last year, Apple's global market share significantly declined, with the total shipment of all series models being 37.5 million units in the first quarter of 2013, accounting for 15.3% of the market share, which decreased by 3.5 percentage points compared to last year.

Secondly, regarding sales targets. Investment bank JPMorgan Chase issued a research report estimating that selling 10 million units of iPhone would be the minimum guaranteed target between China Mobile and Apple. An industry insider calculated: "If each iPhone is subsidized by 1500 yuan to 2000 yuan, the total subsidy cost could reach as high as 15 billion to 20 billion yuan, accounting for 60% to 80% of China Mobile's overall phone subsidy budget, but the estimated revenue generated would only be around 12 billion yuan, far less than the subsidy amount." Under the comparison of high and low returns, it is not easy for China Mobile to achieve this.

Thirdly and most perplexing, concerning subsidy amounts. The potential high phone subsidies dragging down profits have become a consensus among operators. Judging from the tariff subsidies for the iPhone 5S, both China Unicom and China Telecom have reduced them. Calculations show that compared to the operator packages when the iPhone 5 was released last year, subsidies have generally decreased by more than 10%. Therefore, some experts predict that China Mobile will not provide subsidies for the iPhone 5C before the beginning of 2014. On the other hand, from a marketing strategy perspective, the reduction in subsidy amounts by operators may aim to extend the online duration.

In this way, even though "rich and powerful," China Mobile may not heavily subsidize the iPhone. Citigroup analysts stated, "Even if China Mobile launches the subsidized iPhone 5C model, it is estimated that the company will not sell this model on a large scale or provide high subsidies." Some industry insiders pointed out that China Mobile will not give Apple better treatment than other phone companies.

The game between the two parties will continue

China Mobile's six-year wait for the iPhone has finally paid off. Despite seeing the ice-breaking of cooperation, problems still exist, coming from the game between the two parties and the leading advantages of competitors, as well as internal factors. Perhaps now is not the best time for China Mobile to launch the iPhone.

China Mobile has not performed satisfactorily in the 3G aspect. Specifically, compared to China Unicom and China Telecom, China Mobile's 3G network quality is barely satisfactory, and lacks attractive international brand phone partners, resulting in a significantly slower 3G development speed than its competitors. And from the start of talks in late 2007 until now, nearly 6 years have passed, and many old customers of China Mobile have lost patience and switched to Unicom and Telecom camps.

China Mobile's 4G network environment is not yet mature. Currently, the much-hyped issuance of 4G licenses is no longer just a technical issue. Recently, the MIIT approved the large-scale TD-LTE trial in 326 cities nationwide by China Mobile, meaning that the issuance of 4G licenses is entering the countdown phase but will not be immediately implemented. For China Mobile and Apple, whose cooperation focus is positioned on 4G, this is clearly another awkward issue. Especially for China Mobile, "what it lacks is not just a license, it needs a more mature network."

However, regardless of the outcome, the substantial cooperation between China Mobile and Apple adds many variables to the existing market competition. What remains unchanged is that the game between the two parties will continue.