China Mobile Nears iPhone Deal 中国移动引进iPhone在即

By newsdoug on May 17, 2012

China Mobile restarts stalled iPhone talks My headline for this post may be a little misleading, as I’m purely guessing based on the latest media reports that China’s dominant wireless carrier China Mobile (HKEx: 941; NYSE: CHL) may soon sign a long-anticipated deal to sell an Apple (Nasdaq: AAPL) iPhone that can run on its struggling 3 network based on a homegrown Chinese technology. In fact, the actual news in this case is relatively simple, with China Mobile’s new Chairman Xi Guohua telling investors at the company’s annual meeting in Hong Kong that he is talking with Apple about developing an iPhone for a technology called TD-SCDMA, which is the basis for China Mobile’s 3G network. (English article; Chinese article) Xi, who took over as China Mobile’s chairman in March after the retirement of his long-serving predecessor Wang Jianzhou, didn’t say very much more on the subject, except to add that there were no guarantees that a deal would be reached. The 2 sides had actually previously talked about a TD-SCDMA iPhone as much as a year ago, but they never reached a deal for reasons that were never disclosed. My guess is that the conservative Wang wanted Apple to take most of the risk for developing the TD-SCDMA iPhone, figuring that Apple wouldn’t mind spending lots of its own R&D dollars to develop a model for the world’s largest mobile carrier with more than 600 million subscribers. If that was the case, Apple clearly balked at taking such risk by itself and the 2 sides never reached a deal that would have clearly benefited both, especially China Mobile as it steadily lost 3G market share to more aggressive rivals China Unicom (HKEx: 762; NYSE: CHU) and China Telecom (HKEx: 728; NYSE: CHA), which both offer iPhones for their networks. But the situation may have taken a major turn in March when Wang finally retired after months of rumors, leaving Xi to finally take the reins of a company that has seen its growth slow to a crawl in the last 3 years under Wang’s conservative leadership. Not long after Wang left, Apple’s Tim Cook came to China for his own first visit since taking over as the company’s chief executive from Steve Jobs. (previous post) Media closely followed Cook’s trip, which included meetings with top government and industry leaders even though no mention was ever made of a visit to China Mobile. Still, I am quite sure that Cook must have met with Xi and other top China Mobile executives during the visit, with discussion of restarting the stalled TD-SCDMA iPhone talks most likely high on the agenda. Unlike Wang, Xi must realize that his company needs to take some major action to develop its 3G business, which is where the future of mobile communications lies. China Mobile already has a huge cash pile that it never seems to spend or return to investors, and I suspect that a newly empowered Xi will finally be willing to spend some of that money to share more of the risk with Apple for developing a TD-SCDMA iPhone. If that’s the case, look for the 2 sides to make rapid progress in their current talks and announce a long-delayed and much needed iPhone deal in the next 2-3 months, which could greatly boost China Mobile’s prospects in the 3G space and its broader overall outlook.

Bottom line: Apple’s stalled iPhone talks with China Mobile appear to have restarted under the carrier’s new, more progressive leadership, with a long awaited deal possible in the next 2-3 months.

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