Huge Changes for Apple in Major Deal with China Mobile

In the opening seconds of an interview which included Apple CEO Tim Cook and China Mobile’s chairman Xi Guohua, Cook said that this was a “watershed moment.” It very well may be. It is definitely something that can be considered a key milestone for both Apple and China Mobile.

So what is all the fuss about? January 17, 2014 will mark the date that China Mobile commences selling iPhones in China. About six weeks ago China awarded licenses to the top three carriers to move ahead with TD-LTE networks. This is part of what makes it possible for iPhones to enter China.

Apple has been working with China Mobile for several of years now. A couple of years ago, Apple and China Mobile came to an understanding on 4G technology, when Apple agreed that its iPhone would work with China’s TDD-LTE network. This is what gives China Mobile the opportunity to offer the iPhone for the first time.

What was holding things up before this? It was the fact that Apple was not willing to undertake the necessary changes that were needed to make the iPhone work on China Mobile’s proprietary 3G technology. The company calls it TD-SCDMA.

Tim Cook said, "It's a huge announcement...we're incredibly impressed with them, we have deep respect for them. We see this as bringing the world's best smartphone to the very largest and now the fastest network in China."

This comes on the heels of the fact that last quarter saw more iPhones sold in Greater China than ever before. Cook see this deal with China Mobile as "continuing momentum" that has been building up over the last three or four years. He said, "It really is a key market for us."

In fact, according to a report on Fortune.com, China Mobile has already quietly begun to take pre-orders for iPhones. So you can see that it was long poised and ready to make the announcement. Tim Cook is currently in Beijing so that he can be on hand for Friday’s launch.

If the pre-order numbers are to be believed, the count from China Mobile is 1.2 million. The prediction from FBN Securities’ analyst, Shebly Seyrafi, is that Apple will add close to another 17 million iPhones to China Mobile’s customers.

This will not be an inexpensive proposition for users. As it stands, the premium 16GB iPhone 5S will be priced at 5,288 yuan. That translates to about $874. If you want the 64GB model, then you will have to dig deeper. It will be priced at 6,888 yuan, which translates to $1,139. The plastic cased 5C model will be priced at 4,488 yuan for the 16GB version, which is just under $750.

This looks like it will be the first step in a much more comprehensive deal between Apple and China Mobile. Xi Guohua told the Wall Street Journal that this deal will involve broader co-operation between the two firms.

So, is there a loser in this deal? Everything mentioned sounds positive, doesn’t it? Bob O’Donnell, founder and chief analyst for Technalysis, thinks there is, and it’s the obvious.  He told CNBC, "I think Samsung would be the biggest loser of the deal. There's no question Samsung will lose market share. Apple will take a large share of consumers who are willing to consider non-Chinese brands away from Samsung."

It seems that every time any mention is made of a deal between Apple and China Mobile, Apple’s share go up a little. Then, when time too much time lapses with no confirmation Apple shares fall. It just goes to show how important this commitment can be for both companies.