Is It A Bit Early to Define iPhone Success or Failure on China Mobile After One Month’s Worth of Data?

Total non-expert here, but it sure seems like it is. Not that it’ll stop people from trying, of course.

What exactly are expectations these days? Well, here’s Philip Elmer-DeWitt’s very helpful table from just yesterday!

The average projection (not counting that 5 million bear case number, which looks exceedingly unlikely to happen): 19 million iPhones sold on China Mobile in calendar 2014.

This has to be unfamiliar territory even for celco analysts. A high-profile, 5+ year-old best-seller smartphone brand joining the China Mobile roster of partners – late, yet right on time for the 4G/TD-LTE launch – where a decent amount of iPhones have already found their way onto China Mobile, albeit on EDGE access speeds.

While there seems to be a sort-of data point on the progress of the TD-LTE launch (it was reported early March via China Daily that China Mobile installed 200,000 out of 500,000 TD-LTE base stations planned for 2014), I’m guessing most outsiders don’t really know the pace and coverage (China is kind of a big place), nor can they know the pace at which more price-conscious consumers will switch to TD-LTE (an even bigger unknown).

So, where does the China Mobile iPhone stand now, with the information we have or think we have?

WSJ reports, citing China Mobile CEO Li Yue, that about 1 million new iPhone users were added in the month of February. Compared to what? 1.34M total new 4G subscribers in the time same period per China Mobile’s monthly update.

We can safely say, I think, that 1M out of 1.34M seems pretty good as far as a snapshot of the 4G handset competition out of the starting gate (the just-as-new Galaxy Note 3 being but one of the notable TD-LTE competitors also on China Mobile).

We think 1M new iPhone subscribers in a month sounds low, assuming that basically equates to “unit sold”.

We know China Mobile wants 50 million TD-LTE users by year-end.

We know China Mobile has a long way to go in building out its TD-LTE network, though it’s planned to be mostly done coverage-wise by year-end.

We know Apple is gating iPhone sales to those cities where China Mobile starts up TD-LTE service. (I’d imagine most if not all of the other 4G smartphone OEMs are doing the same.)

We can infer that iPhone demand on China Mobile will fall off over time post-initial launch.

We believe China Mobile’s subscribers, like many smartphone users in Asia, like bigger-screened smartphones. (Of course, pretty much every smartphone OEM on Planet Earth differentiates from Apple by offering a bigger-screened handset, so I’m not sure how much there is to take away from that point.)

We can also infer that a substantial fraction of customers intending to buy iPhones on China Mobile will wait for the duofecta of iPhone 6 – iPhone 5S is already at “mid-cycle” after all – plus a more expansive, better-performing TD-LTE network.

It’s practically a given that Apple will go BigPhone for iPhone 6, considering the talk of new product categories and such.

What’s it all mean as far as Apple hitting the “consensus estimate” of 19M China Mobile iPhones sold in 2014? It’s tricky (obviously), and we’re fortunate to even have a data point. There’s no guarantee we’ll have anything more to go on than China Mobile’s monthly 4G subscriber totals, Apple’s quarterly filings, and a whole bunch of “estimates” between now and the end of the year. A better metric would be Apple’s share of China Mobile’s 4G handset market, anyway (although that metric, too, gets less useful to the extent that China Mobile’s TD-LTE aggregate handset mix goes lower-end).

But I’ll go out on a limb here and say that the TD-LTE iPhones are in a “situation” with at least passing similarity to the Verizon partnership in 2011 and Steve Jobs’ “1% of the handset market” goal set for 2008.

Verizon wasn’t a launch partner for iPhone 4,¹ and in some ways the network access situation for iPhone was worse than for China Mobile now, since iPhone couldn’t access Verizon’s LTE network until iPhone 5. iPhone 4 had a decent reception from subscribers nonetheless, and VeriPhone 4S did even better.

Many observers doubted iPhone would manage 10 million units sold in 2008 – but then iPhone 3G came along, which boosted unit sales velocity.

You’d think a combination of more TD-LTE coverage and a brand-new, much-anticipated iPhone 6 with a larger screen could drive increased sales in the latter half of 2014.

1 Though yes, iPhone 4 was on the market a few months longer than the 5S at launch, and there was no way to get any iPhone to run on the CDMA network before then.

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