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Apple Possibly Nearing Deal with China’s Largest Network Provider

  +Follow July 31, 2013 1:10PM
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Apple Inc. (AAPL) CEO Tim Cook met on July 30 with the head of China Mobile Ltd. (CHL) , China’s largest mobile carrier, and by subscription numbers, the largest carrier in the world. Apple has so far failed to realize their potential in China, and is currently only the fifth largest cell maker there.

A major reason Apple has lagged so far in the world’s largest emerging market is that the tech company has failed to get China Mobile to carry iPads or iPhones. Mobile in China is growing at an exponential rate, and analysts expect the market there to triple to $30 billion by 2015.

While Apple still comfortably dominates much of the world, they get absolutely crushed in China. On July 26, analytic firm Strategy Analytics declared that Apple, for the first time since 2007, was no longer the world’s most profitable cell phone maker, losing out to South Korean rival Samsung. Samsung has 19 percent of the Chinese smartphone market, compared to Apple’s 9 percent.

China Mobile has so far held out on a deal with Apple for a couple of reasons. One, China Mobile has their own homegrown network that is not compatible with Apple. And two, China Mobile is reticent to offer the subsidies so common with iPhones when users sign contracts, subsidies Apple tends to insist carriers provide.

Despite these issues, Cook’s meeting with China Mobile Chairman Xi Guohua in Beijing illustrates that both parties are keen on finding a compromise. China Mobile is looking to upgrade their network, and it would signal an opportune time to make the network compatible with Apple.

That network – TD-SCDMA – is inferior to other major Chinese telecom technology, and China Mobile would like to upgrade it to compete with the other major Chinese telecom companies China Unicom and China Telecom. Both of those companies currently support Apple. The Chinese government will be issuing 4G licenses to Chinese telecom companies later this year.

Apple’s stock is down .48 percent to hit $451.14 a share, although it has rebounded nicely following a healthy earnings report on July 23, and is up over 7 percent since that date.

[Image via Flickr]

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.


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  +Follow July 31, 2013 1:10PM
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