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Tepid China Mobile iPhone Launch Isn’t Necessarily A Bad Sign

After a six-year battle, Apple’s newest iPhones finally went on sale today with China’s largest carrier. The reception wasn’t what anyone expected.

Tepid China Mobile iPhone Launch Isn’t Necessarily A Bad Sign
[Image: Flickr user IvanWalsh.com]

Tim Cook flew to China to help court China Mobile’s 760 million subscribers, but unlike the iPhone’s well documented U.S. launches, about a dozen people lined up to buy the newest iPhone early Friday morning, according to the New York Times.

China Mobile’s agreement with Apple had people in China going nuts about the news since the announcement was confirmed in December. The move was critical to Apple’s global reach even though its share of the market has been steadily rising since 2012.

But don’t let the lukewarm reception in Beijing fool you. By Wednesday of this week, a China Mobile spokesperson told Business Insider that 1.3 million reservations for the iPhone had already been placed, though Reuters checked that figure and reported several discrepancies because of registrations made using fake numbers.

The main feature to entice customers to switch to China Mobile’s iPhones will be the faster 4G network; the two other carriers currently selling iPhones only offer older generations of the phone. Yet, with a hefty pice tag of 5,288 yuan ($867 USD) for the 5S or the slightly more affordable 5C at 4,488 yuan ($741 USD), Apple will have difficulty doing so. To put that in perspective, the average monthly income for a family in China is $2,100 USD, so the newest iPhone iteration would deplete the average family of monthly finances. And unlike the U.S., post-paid contracts aren’t the norm; only about 100 million of China’s 760 million subscribers are post-paid, meaning the rest aren’t eligible for the carrier subsidies that make iPhones cheaper in the U.S.

According to Bernstein Research’s Toni Sacconaghi, that puts China Mobile’s tangible addressable iPhone market at only 10 million. That could change if the iPhone drives more people into post-paid contracts. Jeffries analyst Cynthia Meng said that China Mobile’s sales will reach 12 million in its 2014 fiscal year, but its subsidies will leap 57% to 42.4 billion yuan ($7 billion), up from 27 billion yuan in its fiscal year 2013.

Adding fuel to the fire, there are a reported 45 million people using iPhones on China Mobile’s network already. Smuggling iPhones in from Hong Kong and through other channels is commonplace, which saves people a considerable amount of money on the hardware. Still, Samsung and other Chinese companies reign supreme when it comes to smartphone sales. Samsung comes in China’s top spot with more than 18% market share offering multiple affordable smartphone options.