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The Last Big Question About Apple's China Mobile Deal, 4G Only Or 3G As Well?

Dec 23 2013, 2:46am CST | by

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The Last Big Question About Apple's China Mobile Deal, 4G Only Or 3G As Well?

Apple's finally got the China Mobile deal that has been rumoured for so long as Parmy Olson reports . There is just the one last big question to ask about it. Does it cover 4G only, or will Apple roll out a 3G TD-SCDMA phone for the Chinese market as well?

Apple has spent the last six years trying to ink a carrier deal with China Mobile , and for good reason: the state-backed carrier is the biggest in the world with 760 million wireless customers, more than double the population of the United States. For Apple to truly get a foothold in China, it needed China Mobile. On Sunday, the company announced it had finally entered a multi-year contract to sell its iPhone through China Mobile, representing what may be CEO Tim Cook’s most important breakthrough in China.

Sadly we need a little bit of technical background to understand this. China Mobile’s 3G network is based upon the TD-SCDMA specification. Apple has never released a phone that can operate on this type of network. So therefore there aren’t any iPhone users making use of China Mobile’s 3G network. There are some 30 to 35 million people using an iPhone on that network however. They’re limited to using them at EDGE or 2G speeds.

China Mobile is currently building out its 4G network: this is based upon TD-LTE and this is something that the iPhone 5 c and 5 s do indeed support. So, as that network rolls out (16 cities by the end of this year, 340 by the end of 2014) therefore people will be able to use the iPhone on that expanding 4G network.

However, the big question is whether Apple will release phones that work on that TD-SCDMA network? We know that Apple have in fact designed a phone that can do that, we know that they’ve had versions of both the iPhone 5 c and 5 s approved for operation on the network :

A1516 (a version of 5c that works on TD-LTE and CHL’s 3G TD-SCDMA) and A1518 (a version of 5s that works on TD-LTE and TD-SCDMA). Neither show up (yet) on the 5s and 5c model listings on Apple’s website. Both have received network access licenses for China Mobile’s network (permit numbers 00-8573-139033 and -139036, respectively).

Over in the Apple press release we get our answer :

“Apple’s iPhone is very much loved by millions of customers around the world. We know there are many China Mobile customers and potential new customers who are anxiously awaiting the incredible combination of iPhone on China Mobile’s leading network. We are delighted that iPhone on China Mobile will support our 4G/TD-LTE and 3G/TD-SCDMA networks, providing customers with high-speed mobile service,” said Xi Guohua, China Mobile Chairman.

So Apple is releasing the TD-SCDMA models for that China Mobile network. And there’s an implication for this in the likely sales .

Having sold 125 million iPhones in fiscal 2012, Apple could sell another 17 million through China Mobile alone in 2014, according to estimates from Piper Jaffray analyst Gene Munster, adding 5% to the Wall Street ’s revenue estimates for Apple next year. Analysts at Robert W. Baird & Company believe Apple could sell an even bigger 30 million iPhones through China Mobile in 2014.

Apple’s potential sales are not limited to just the audience affected by the 4G, TD-LTE, roll out. The entire 760 million China Mobile customer base is a potential target. It would be a reasonable assumption that sales will be at the higher end of the predicted range rather than the lower therefore. But do note that important word “assumption” in there.

There’s one other small thing of interest here. With the release of each new iPhone and iPad there’s been a large amount of grey market activity. People purchasing the iKit outside China in order to bring it into China for use. This has partly been driven by release timings, Apple until recently launching later there than in other markets, and partly by the taxation of the iKit which creates a price differential. This will obviously not happen with this latest set of iPhones capable of working on the TD-SCDMA network. For no one else uses this standard other than China Mobile therefore the phones won’t go on sale outside of China. Thus there can be no such grey market activity.

Source: Forbes

 

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