4G network key to China Mobile-Apple partnership

63% of all Apple handsets in China are already on China Mobile’s network

China Mobile, the world’s biggest mobile carrier has recently announced it will start offering Apple 5S and 5C as of 17/1/2014. It is likely that China Mobile and Apple have high expectations to improve respective sales from this deal, however, given the current smartphone purchasing trend in China, the deal will undoubtedly present a challenge.

The latest data from Kantar Worldpanel ComTech, the global market leader in consumer panels, reports by the end of Q3 of 2013, before the recent sales agreement, that approximately 63% of all Apple handsets in China are already on China Mobile’s network. The report also shows that for every 100 smartphones on China Mobile, approximately 18 handsets are iPhones, a similar ratio for China Unicom and China Mobile who have had been selling iPhone under their official sales agreement for a while.

Customers on China Mobile who previously wanted an iPhone obviously found a way to source one via other channels, and since Apple has already made some progress within China Mobile, its room for growth is somewhat limited, and unlikely to see a huge sales boost for both organizations.

ComTech’s recent report also shows, in Q1 2013, 33.4% of Smartphone purchases were priced at more than ￥3000 ($494USD), and in Q3 2013 that figure was 24.6%, a drop of almost 10 percentage points. Consumers are spoiled for choice with the range of handsets on offer, with many local brands offering bigger, faster and most importantly, cheaper models - this increased competition has driven down the average handset price and attracted people who may have otherwise purchased a premium device like the iPhone.

The report also indicates that iPhone has maintained its market share in China in 2013. However, almost half of all iPhones sold were still iPhone 4 and 4s serials. Those earlier models have a clear advantage in price, and are particularly appealing when bundled with carrier offers. Again, Chinese consumers are very sensitive to price and, with China Mobile only offering the iPhone 5C and 5S, they really need to play their 4G card right to compete with other networks who will sell earlier models at a cheaper price. On the other hand, only the iPhone 5C and 5S sold by China Mobile are compatible with 4G networks in China, which should definitely give China Mobile the advantage in attracting the high spending, data hungry consumers who are less concerned about handset price. The deal between Apple and China Mobile will bring many benefits to consumers, but a new carrier bundle price and 4G network will be the key to success.

In the report, it also highlights repeat Smartphone purchases in China are equally important as Feature-phone upgrades. During the first 3 quarters of 2013, 52% of smartphone sales were generated by Feature-phone owners upgrading to a smartphone, and the remaining sales were actually from repeat Smartphone purchases. And the average purchase price for iOS is ￥3919($645USD), more than twice that of the Android average purchase price of ￥1561($257USD).