As Apple (AAPL) moves into India and Russia, it still needs an official foothold in the largest cellular market–China. On the mainland there are over 500 million cellular accounts.
The consumer electronics company may be getting much closer to a partnership with China’s largest wireless carrier, China Mobile. China Mobile would buy the handsets from Apple and sell them to consumers at a subsidized price.
According to JLM Pacific Epoch, "The new plan is intended to replace revenue sharing models that left earlier talks at a stalemate."
If Apple is to reach its long-term goal of selling 20 million iPhones a year, it will need strength in the Chinese market.
Apple’s new deals with carriers may end up being financial unattractive for the cell companies, so Jobs & Company’s dreams of dominating the high end of the smart-phone market could still fall apart. To cut the high consumer price of the iPhone, large phone companies like AT&T (T) are almost certainly losing money on the initial purchase of each handset. Their gamble is that they will win new customers from competition and make money on profitable voice and data plans which are marketed with the iPhone.
If the flow of new customers and higher margin relationships with customers does not come, the iPhone will turn out to be just another handset sold alongside of a dozen other brands.
Douglas A. McIntyre
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