One of the things that’s made Apple(s AAPL) so uncannily successful in the mobile phone business has been its insistence on setting the terms with wireless operators. But Apple may have met its match with China Mobile, the largest mobile operator in China — and the world. The operator’s president had a few words to say about why it has yet to offer the iPhone on Wednesday, and as it turns out, it’s not a network compatibility issue that’s keeping the two apart.
According to Unwired View, which covered the China Mobile Worldwide Developers Conference, President Li Yue said of the iPhone:
Technology is not a problem, [it’s] mainly about business model and benefit-sharing issues.
Yue is saying that his company’s 2G GSM network isn’t the barrier to them selling the iPhone. And that’s technically true: there are double-digit millions of China Mobile subscribers who’ve been using the iPhone on the network anyway — similar to how you can technically use the iPhone on T-Mobile in the U.S. But he also may be implying that there’s no “technology” barrier to Apple simply adding the right kind of 3G radio to the iPhone to make the device work on his network for both cellular and data connections. After all, Apple has been forced to design multiple versions of the iPhone, rather than a single global model even here at home in the U.S. If Apple is already making iPhone for AT&T and Verizon’s unique 4G frequency bands, why not make one for the world’s largest carrier, is one way to think about it.
Yue is also saying that he’s not convinced selling the iPhone makes financial sense for his company. Apple does make rather large demands of its carrier partners, requiring them to make big investments in iPhone units up front. And he also appears concerned over Apple’s terms. The iPhone is one of the best-selling smartphones in the world, and Apple clearly has the leverage to command a profit-sharing agreement that is in its own best interests.
However, it does sound like Yue’s comments are very likely a negotiation tactic. China Mobile and Apple have been talking for years about working together. Apple has the second- and third-largest Chinese carriers on board, but China Mobile would be hugely important to Apple’s future growth in the country. That’s why Yue can play hard-to-get.
China only grows more crucial to Apple, so it seems like Apple CEO Tim Cook will at some point want to make a deal — even if the terms aren’t quite as favorable as he’s used to.