On Sunday, Apple (AAPL) announced it was partnering with China Mobile to sell its iPhone — a huge move considering the Chinese company is the world’s largest mobile phone carrier.
AAPL stock is up 3.4% with the news.
Here are three takeaways on Apple’s move — and what it means for AAPL stock
Apple China Deal Takeaway No. 1: AAPL Shows Growth
Apple has been losing ground on market share across the globe as competitors push Android-based phones. It’s been especially hit hard in China (via LA Times).
Apple has had the Wall Street monkey on their back to show growth, either expanding their current products via distribution or via a new category product like a watch, TV or convertible,” said Patrick Moorhead, an analyst at Moor Insights & Strategy. “The China Mobile deal is huge for Apple because it provides what they’ve never had: broad distribution in China with the country’s largest carrier.
AAPL knows gaining a foothold in China could help stem further losses in the region — and work to give its company more global reach.
Apple Chief Executive Tim Cook said as much about the deal that’s been long in the making: “China is an extremely important market for Apple, and our partnership with China Mobile presents us the opportunity to bring iPhone to the customers of the world’s largest network.”
Apple China Deal Takeaway No. 2: The AAPL Deal Could Still Disappoint
Let’s get the obvious out of the way: iPhone 5s and iPhone 5c will go on sale Jan. 17 through China Mobile and Apple stores in China. As the current quarter ends Dec. 31, this means AAPL will see no immediate win.
There’s also another issue that may be less obvious: Millions of China Mobile customers already have the iPhone. As Quartz notes, well-to-do consumers “purchase the phones from Apple stores in China or abroad (or maybe on the black market), and then use them with their China Mobile SIM card, as if they were a basic cell phone.”
Additionally, China Mobile customers who have yet to buy them may be, well, over them.
Rival telecom companies are offering the 5S and 5C for free, if customers lock into long contracts. Even so, subscribers to these networks have not bought the phones at anywhere near the rate they bought last year’s iPhone 5. Leader Samsung now has over 20% market share in China, thanks to heavy marketing spending and cheaper smart phones.
Apple China Deal Takeaway No. 3: Apple’s Price Point Will Be Tested
When considering the average salary in China is much lower than that of the US, Apple’s iPhones are pricey. The costs begin at about $550. While there is still interest from China Mobile subscribers, it’s unknown how much they’ll fork over.
The lower-priced offerings of Samsung, Xiaomi and Huawei are best bets for China’s middle and lower-class, so AAPL is banking on its prestige and name-brand. The partnership will show AAPL just how much people are willing to spend in a country that AAPL has been slow to infiltrate. AAPL is current in fifth place in China.
China Mobile will reportedly have 340 cities covered by 4G by the end of next year.