After its stock slipped more that $41 in the course of a week (from $195 on Nov. 6 to $154 on Nov. 12), Apple was finally able to recoup some of those losses late Tuesday, ending the day around $170/share.
Interestingly, many analysts attributed yesterday's 10 percent rebound to ongoing "talks" between the Cupertino company and China Mobile, China's largest mobile phone operator. The latter company's own stock also happened to get a boost, shooting up 9 percent after its CEO, Wang Jiangzhou, said his company was seriously considering carrying the iPhone.
Of course the fact that Apple is whispering sexy things about the iPhone in the ears of various carriers across the world isn't exactly a secret. The latest predictions about where the iPhone will (officially) pop up next seem to center on Spain for the moment. But there have also been continuous murmurs about operators in Australia and Canada also being close to inking a deal with Apple.
What's interesting with China, though, is that the country currently has an estimated 300 million mobile subscribers; and that number that is expected to increase to a whopping 500 million over the next few years. If Apple did land a deal with the China Mobile, it could end up being one of the biggest drivers iPhone sales to date, especially as Apple moves from a revenue share business model with carriers to (possibly) a strictly a volume based model.
Tim Bajarin of Creative Strategies says he just got off the plane from a visit to China and "people were ecstatic" about the possibility of an iPhone deal. The problem, he says, is that China Mobile is going to have a very difficult time agreeing to the revenue splits Apple has typically demanded for the iPhone.
Photo: Mat Dartford via Popular Science
Indeed, an anonymous executive told Reuters on Wednesday that revenue sharing is literally a foreign concept in China, further noting that "our business model does not entail sharing revenue with terminal producers -- we don't share revenue. That's a Chinese rule. All it is right now, on the iPhone and Apple, is that the firm welcomes their approach."
Apple now has some pretty solid data proving it can drive not only sales, but also new customers to carriers. There's also the fact that its revenue share model has clearly been lucrative for the company, at least with regard to AT&T. But from the looks of it China Mobile doesn't really need Apple's help in gaining new subscribers from the competition because, well, it really doesn't have any. As such, I floated the idea of Apple forgoing a revenue share model with China Mobile simply to get at those 300 million cell phone users to Bajarin. It didn't take.
"I do not believe for a second that Apple would choose to give up on the revenue split model," Barajin said. Having said that, though, he did see Apple loosening some of the terms a bit during negotiations. "While I don't believe they'd give up revenue split I would think there's at least potentially room for some give on the amount of revenue share."
The other factor at play is growing evidence there is already a thriving black market for iPhones in China. One report from a Chinese news source says that unlocked iPhones are only getting more popular in certain regions of the country.
"A lot of digital electronic stores or regular electronic stores are quietly selling iPhones, and the demand is far more greater than the supply," claims a recent post on the West/East blog.
Chinese iPhone fanatics have even bestowed the device with a new name: Ai-Feng, which literally means "love-crazy."
Says Bajarin:
"I saw unlocked iPhones everywhere -- in cell phone stores and camera shops, all over the place. It was unusual even if one of the major Hong Kong stores didn't have a least one or two [unlocked iPhone] advertisements outside of the store. It was really blatant."
Exactly how much a thriving iPhone black market worries Apple, as well as how badly the company wants access to those 300 million mobile users, remains to be seen. What is clear at this point is that Apple, if it wants access to China, is going to have to loosen its notoriously rigid demands. And even if it does, a China deal is going to take a lot of work.
"The reality is I don't see anything happening in the way of a deal anytime soon," says Bajarin. "From a purely logical opportunity, sure, it makes sense Apple is talking to China, but it certainly won't be the next deal Apple announces. Not even close."
