Apple CEO Tim Cook did something his predecessor, Steve Jobs, didn’t do in pursuit of a deal for the iPhone with China Mobile, the world’s largest mobile carrier: He actually went to China and publicized his visits.
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The three visits in 13 months that Cook undertook after becoming CEO are part of the reason Apple was able to ink a deal in December with China Mobile. That ended six years of negotiations, according to the Wall Street Journal, which has a recap of the most recent meeting between Cook and China Mobile Chairman Xi Guohua. Those negotiations were started in 2008 by Jobs, who never publicly visited China.
“We’ve gotten to know each other,” Cook said in a rare joint appearance with Xi in Beijing last week to mark the availability of iPhones through China Mobile on Jan. 17. “Today is a beginning, and I think there are lots more things our companies can do together in the future.”
Xi said the alliance between the two companies will be “broad” and expand beyond smartphones.
Cook may be talking up the deal with China Mobile, which has more than 760 million subscribers, because it’s such a big deal for Apple. is a coup for Apple, which is working to fend off competition in the fast-growing Chinese smartphone market from lower-priced rivals. Apple ranks fifth in the market in China behind market leader Samsung and local suppliers Lenovo, Yulong and Huawei, according to research firm Canalys.
Greater China (which Apple defines as China, Hong Kong and Taiwan) has been the company’s fastest-growing market and now accounts for about 15 percent of sales, up from single-digits just a few years ago. It’s the third top region for sales after the U.S. And Europe. While Apple has had distribution deals with China’s other top carriers — China Telecom and China Unicom — China Mobile, which boasts than 176 million users on its high-speed 3G network, is the big catch. The new iPhones will run on China Mobile’s new 4G network as well as the company’s 3G network, which is built on its home-grown technology.
Several Million Pre-orders
Xi said that China Mobile has already received “several million” pre-orders for the iPhone since December and that the carrier plans to introduce new subsidies for Apple’s smartphone in the future, though he declined to provide details at last week’s event. According to Apple’s website in China, the retail price of a 16-gigabyte iPhone 5Swithout any subsidies is 5,288 yuan, or about $870, while an iPhone 5c with the same storage capacity is CNY4,488 ($738), the WSJ said. Phones based on Google’s Android mobile operating system and with similar hardware are priced starting at $327.
Despite the price difference, Apple’s brand does have cachet with China’s rising middle class, with consumers in the past lining up at stores and causing riots to get the latest gadgets designed by the Cupertino, California-based company. And Cook reiterated last week that Apple isn’t interested in going after the low-end of the mobile market and would continue to focus on quality over quantity.
“As of this weekend we will be selling iPhones in more than 3,000 additional locations,” Cook said. ” It’s a monumental day and a watershed moment.”
Apple sold more iPhones in Greater China in the December quarter than it has ever before, Cook said, adding that total iPhone sales climbed to record in the period. Analyst Gene Munster of Piper Jaffray estimates that Apple may have sold 55.5 million worldwide. Apple reports its fiscal first quarter results, which cover the December quarter, on Jan. 27.
Xi said the companies faced technological and commercial challenges in coming to an agreement, “something he likened to the ‘quarrels’ involved in any courtship,” the WSJ reported. Those challenges included China Mobile’s proprietary network, which Apple considered slow and unreliable. “Cook met with Mr. Xi in the fall of 2012 to discuss how to get the new iPhone to run on China Mobile’s faster fourth generation network. He also met with Qualcomm executives to build a chipset that would support China Mobile’s version of the iPhone,” the paper said.