Apple's strict conditions keep it from offering iPhone to 2.8 billion customers

Posted:
in iPhone edited January 2014
Prohibitive carrier requirements made by Apple have prevented some 2.8 billion customers from having access to the iPhone, according to a new analysis.

The estimate comes from Horace Dediu of Asymco, who spoke with Bloomberg about Apple's untapped market potential. Among the biggest partners Apple has yet to strike a deal with are China Mobile, the largest carrier in the world, and NTT DoCoMo, Japan's largest mobile provider.

iPhones
Apple's current iPhone lineup.


In contrast, Apple's chief rival Samsung has agreements in place with almost all of the world's 800 carriers, according to Dediu. According to him, Apple has "run out" of carriers that will agree to its conditions for carrying the iPhone.

Requirements imposed by Apple include sales quotas that can prove costly for carriers. The rules are said to be especially prohibitive for carriers that do not have a large number of subscribers that use costly data plans.

Market watchers have anticipated a deal between Apple and China Mobile for years, but the iPhone remains unavailable to the network with 715 million subscribers. While China Mobile is the largest carrier in the world, only 13 percent of its customers are on high-speed data plans, compared to 33 percent for rival China Unicom, and 44 percent for China Telecom.

The issues highlight the fact that there are large market segments ? to the tune of 2.8 billion customers, by Dediu's estimate ? that Apple does not currently serve with its existing iPhone lineup. That's helped to fuel speculation that Apple could be working on a low-cost iPhone that would appeal to customers who do not buy their handsets with contract subsidies.

JP Morgan


In its report published on Monday, Bloomberg said once again that Apple is, in fact, developing a more affordable iPhone that could be introduced as soon as this year. The rumors are now accompanied by speculation that Apple could relax some of its existing terms in order to make the iPhone available to those customers that are currently out of reach.

One analysis from last week suggested that Apple would not offer a so-called "low-end" iPhone, but would instead target the mid-range segment of the current smartphone market. Mark Moskowitz of J.P. Morgan believes Apple could sell a new iPhone model priced between $350 and $400 ? a price that would be "very attractive" for many consumers.
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Comments

  • Reply 1 of 53
    What is with the obsession that every company (okay, just Apple really) should make every product line available to every market and every price point? I can't buy a diesel MINI Cooper D in Canada, and couldn't afford the turbocharged Cooper SD even if it was - but I'm perfectly happy with my naturally-aspirated petrol Cooper.
  • Reply 2 of 53
    jungmarkjungmark Posts: 6,926member
    Why does Apple need a "new" low/medium cost iPhone. That's what the 4/4S is for. Apple isn't going to use cheap parts.
  • Reply 3 of 53
    applelunaticapplelunatic Posts: 181member


    Yes, and the restrictive conditions are why the carriers can't pre-install crapware, block system updates, etc. like they can with Android and they could with old WinMo. The worst thing Apple could do would be to rescind their strict conditions to chase market share.

  • Reply 4 of 53
    brutus009brutus009 Posts: 356member


    Potentially 2.8B new customers... and yet analysts claim market saturation.

  • Reply 5 of 53
    juiljuil Posts: 75member


    That’s one side of the coin... The flip side: 2,8 bil. customers in the world could switch carriers in order to have access to Apple’s iPhone (which I believe to be happening in Japan and the States... I’m I wrong?).


     


    I don’t now of many carriers currently crying about having regrets to have made a deal to get the iPhone. And I don’t remember a carrier anoucing that they would not continue selling the iPhone after having introduced it...

  • Reply 6 of 53
    sennensennen Posts: 1,472member


    In Japan at least, au and Softbank are doing quite handsomely from the iPhone, so it's more a case of DoCoMo's loss than anything else. People have been switching like crazy, Softbank in particular reaping the benefits. Anyhow, there's no point offering it on certain carriers if by doing so in it's going to dilute your brand or screw with the user experience.

  • Reply 7 of 53
    hittrj01hittrj01 Posts: 753member

    Quote:

    Originally Posted by jungmark View Post



    Why does Apple need a "new" low/medium cost iPhone. That's what the 4/4S is for. Apple isn't going to use cheap parts.


    While I agree, I could see them coming out with an iPhone 4S equivalent with the Lightning connector once the 5S comes out, just so they can get everything off of the old dock connector. I believe this is what's happening. iPhone 4S on the inside, polycarbonate body, Lightning connector, maybe multiple colors. I think it would be huge for its intended market.

  • Reply 8 of 53
    applelunaticapplelunatic Posts: 181member

    Quote:

    Originally Posted by sennen View Post


    In Japan at least, au and Softbank are doing quite handsomely from the iPhone, so it's more a case of DoCoMo's loss than anything else. People have been switching like crazy, Softbank in particular reaping the benefits. Anyhow, there's no point offering it on certain carriers if by doing so in it's going to dilute your brand or screw with the user experience.



    Exactly, the point is to make the people come to you not to beg and plead for people to buy your stuff.  And as you mention and as we've seen even in the US, people are more than willing to switch carriers to get the iPhone if the company they are on won't offer it. I remember talking to a manager at a local T-Mobile shortly after the 5 launched saying how T-Mobile would never agree to offering the iPhone because of all the additional conditions that Apple imposed.  Now look where we are at now. image

  • Reply 9 of 53
    rogifanrogifan Posts: 10,669member
    brutus009 wrote: »
    Potentially 2.8B new customers... and yet analysts claim market saturation.
    Market saturation at the high end. These analysts are basically saying Apple needs to compete all over the place or they're doomed. I think Apple will find a way to do it, and they don't need a cheap colored plastic phone to do it. In places like China, India, Brazil, etc. they can reduce the price of older models they're still selling. Doing that doesn't run the risk of eating into their flagship device like a brand new cheaper phone would do. I can't see Apple building a brand new cheaper phone but only selling it in certain countries.
  • Reply 10 of 53
    rogifanrogifan Posts: 10,669member
    hittrj01 wrote: »
    While I agree, I could see them coming out with an iPhone 4S equivalent with the Lightning connector once the 5S comes out, just so they can get everything off of the old dock connector. I believe this is what's happening. iPhone 4S on the inside, polycarbonate body, Lightning connector, maybe multiple colors. I think it would be huge for its intended market.
    Why does it need to be plastic? iPod shuffle, nano and touch aren't plastic.
  • Reply 11 of 53
    theothergeofftheothergeoff Posts: 2,081member

    Quote:

    Originally Posted by Rogifan View Post





    Market saturation at the high end. These analysts are basically saying Apple needs to compete all over the place or they're doomed. I think Apple will find a way to do it, and they don't need a cheap colored plastic phone to do it. In places like China, India, Brazil, etc. they can reduce the price of older models they're still selling. Doing that doesn't run the risk of eating into their flagship device like a brand new cheaper phone would do. I can't see Apple building a brand new cheaper phone but only selling it in certain countries.


    If they did it would be a Grey Market in reverse.

  • Reply 12 of 53
    jameskatt2jameskatt2 Posts: 722member
    So analysts want Apple to sell junk iPhones to customers who don't even use data plans.

    These are customers who won't shop at the App store. These are customers too poor to afford another Apple product like a Mac. They create no halo effect. Nor are they likely to stick with Apple.

    These customers are not even worth it. They want to use the iPhone like a dumb cell phone - just like they use Samsung's phone.
  • Reply 13 of 53
    tallest skiltallest skil Posts: 43,388member


    Apple's strict conditions keep it from offering iPhone to 2.8 billion customers



     


    Hey. Analysts. THIS IS BY DESIGN. SHUT UP.

  • Reply 14 of 53
    gazoobeegazoobee Posts: 3,754member


    The way I read the actual sources, Dediu (the only analyst who has any real credibility) is only saying that there are carriers that need a cheaper phone because the number of users willing to pay for the current phone is drying up.  The article, on the other hand puts all this other stuff in his mouth about the "conditions" in Apple's contract, when in fact that seems to come mostly from the interviewer and "other sources."  


     


    It paints a picture of draconian terms and iron-clad contracts, it even implies that these contracts are irregular in some way or unheard of, but no proof or even supporting evidence is offered.  It's never even explicitly stated what the (hypothetical) "other" complaints about Apple's contracts are beyond the sales quotas which are quite normal in such circumstances.  Apple is contrasted against Samsung as if to imply that Samsung's contracts are better or "nicer" but in fact Samsung has a deal with carriers Apple does not, because Samsung makes cheaper phones for those markets.  


     


    The way this post (and the source articles), is written it seems like the argument is that "Horace Dediu says that Apple's contracts have lots of weird conditions that no carrier will agree to anymore," when in fact he hasn't said anything of the sort.  


     


    That seems to be more the interviewer's point of view than Didiu's.  

  • Reply 15 of 53
    theothergeofftheothergeoff Posts: 2,081member

    Quote:

    Originally Posted by Rogifan View Post





    Why does it need to be plastic? iPod shuffle, nano and touch aren't plastic.


    maybe not the best example... the touch is $299 list without any phone hardware, and accompanying battery to power it. Push the price $100 for those components, the size bump, and the battery tech... you're still at $400 for the 'low end' phone.


     


    The real issue is... what does 'plastic' buy you?


     


    Plastic to many 'analysts' equals... low cost of pieces: it 'has' to be plastic, because the injection molded parts vs material cost and manufacturing of the glass and metal parts of the iPhone are $20/30 less than the current phone (screen and 'mechanical parts' assumed to be $77).  and it's easier to assemble plastic (and current estimated  manufacturing cost [building/labor/assembly line/defects] is $8/phone, so lets say $4 for manufacturing savings.   And they think it will selling price will drop in half if they save 25% in parts and labor;-)?


     


    pretty fuzzy math by the 'analysts.'

  • Reply 16 of 53
    mcarlingmcarling Posts: 1,106member
    Apple should hold the line and not cave in to short-term pressures. Customers want iPhones and will switch to the carriers that offer them.

    For example, China Unicom and China Telecom will continue to pull away from China Mobile in terms of percentage of customers subscribing to high-speed data plans.
  • Reply 17 of 53
    enzosenzos Posts: 344member
    The pre-paid market is huge in India, China and developing economies. That's what Apple would be going after if it produced a new lower-cost model (not my taste but prob plastic for easier, cheaper production and multi colours).

    For legal reasons in Oz, the iPhone has been available here from Apple sans contract almost from the start. Indeed, my sister has a (no contract) pre-paid 4S and I have an on-contract 5.

    --
    "Prepaid accounts for 95% of cellphone handsets in India, 80% in Latin America, 70% in China and 65% in Europe". http://articles.latimes.com/2013/feb/19/business/la-fi-0220-prepaid-cellphone-boom-20130220
  • Reply 18 of 53
    gazoobeegazoobee Posts: 3,754member

    Quote:

    Originally Posted by hittrj01 View Post


    While I agree, I could see them coming out with an iPhone 4S equivalent with the Lightning connector once the 5S comes out, just so they can get everything off of the old dock connector. I believe this is what's happening. iPhone 4S on the inside, polycarbonate body, Lightning connector, maybe multiple colors. I think it would be huge for its intended market.



     


    I would make sense, that instead of offering last year's and the year before that's iPhone model, that Apple places similar internals into a single, cheap package and markets that in place of the previous two iPhones.  The reason you mention in regards the lightning connector is just one current reason for doing so.  It would allow the "cheap" iPhone to be more up to date in that they could pick and choose components for it making it more compatible with the current generation.  


     


    If such a thing could be done, especially if it could be done with a price similar to the two year old phone, then Apple would not only have the iPhone, they would have a second choice model that could be priced as little as $150-$200 off contract and free with contract.  


     


    That would be a one-two punch that would certainly dominate the industry.  


     


    I'm not sure it makes sense to do it this year however because you'd probably want to start on a "tick" year not a "tock."  

  • Reply 19 of 53
    wovelwovel Posts: 956member
    Since Apple only makes smartphones, China Mobile is really only slightly larger than Verizon. Not quite as big a deal as I thought.
  • Reply 20 of 53
    Why would Apple want to sell a "cheap" iphone to "cheap" customers in a country with the most the most rampant software piracy in the world. Apple sells more than a phone, they sell a "phone ecosystem". Why should Apple pursue a customer base that would by and large, pirate there way out that ecosystem?
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