Apple CEO: iPhone Sales in Greater China Hit Record High in Fiscal 1st Quarter -- Update

By Paul Mozur 

BEIJING-- Apple Inc. Chief Executive Tim Cook said Wednesday its deal with China Mobile Ltd. to offer iPhones will help bolster sales of the device that hit a record high in Greater China in the fiscal first quarter.

China Mobile Chairman Xi Guohua said millions of Apple's iPhones already have been ordered by the carrier's customers, signaling strong demand for the device. Sales of the iPhone through China Mobile, the world's largest carrier by subscribers, are set to begin Friday.

Speaking at a small media briefing to Chinese media and The Wall Street Journal, Mr. Cook said he is "incredibly optimistic" about the outcome of the cooperation with the Chinese carrier. The deal won't be limited to handsets and entails broad cooperation between the two companies, Mr. Xi said, but he declined to give further specifics.

"We've gotten to know each other...today is a beginning, and I think there are lots more things our companies can do together in the future," Mr. Cook said.

He didn't provide further details about Apple's first-quarter sales. The company is scheduled to release results for the period later this month. In October, Apple posted fourth-quarter revenue for Greater China, which includes Hong Kong and Taiwan, of $5.73 billion, up 6% on the year.

The deal with China Mobile is the last piece of the puzzle for Apple in the country, the world's biggest smartphone market, officially making the iPhone available through all three of China's state-run telecom service providers. Though neither Apple nor China Mobile would comment on the exact terms of the agreement, the U.S. company is likely to get a considerable bump from China Mobile, which analysts expect will spend generously on marketing and handset subsidies to sell the iPhones.

The pact also massively expands the reach of Apple's sales channels in China, making the iPhones available in China Mobile's thousands of stores nationwide.

"As of this weekend we will be selling iPhones in more than 3,000 additional locations," Mr. Cook said. "China Mobile already has a reach to many cities that Apple does not have a reach to."

Still, Apple faces headwinds in China as high prices for the smartphones and a lack of significant carrier subsidies has led consumers to buy cheaper options that run Google Inc.'s Android operating system. According to Apple's China website, the unsubsidized retail price of a 16-gigabyte iPhone 5S is 5,288 yuan (US$874), while an iPhone 5C with the same storage capacity costs CNY4,488 (US$742).

Mr. Cook said that Apple wants to reach as many Chinese consumers as possible by offering iPhones through China Mobile, and added that the country has more than half a million people writing apps for the U.S. company's iOS operating system.

"Apple has always been about making the best products, not the most products, so that's always our North Star and that's not going to change ever," Mr. Cook said.

While the iPhone remains a highly coveted product for many Chinese consumers, more customers are opting for cheaper options, many of which are produced by local companies like Xiaomi Inc. and Huawei Technologies Co.

Analysts say the latest deal would be no panacea for Apple's sales in China, though it could give it a healthy shot in the arm. The agreement will give Apple access to China Mobile's more than 700 million subscribers--roughly seven times the customers who use Verizon Wireless, the largest carrier in the U.S. Analysts project the deal could bring Apple anywhere from 15 million to 39 million iPhones through the carrier in 2014.

Write to Paul Mozur at [e-mail]

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