In an article published today at the Wall Street Journal, the issue is that China's carriers are cutting subsidies for new iPhones this year with respect to las year.
"Just as analysts are arguing that the new iPhones needs to be cheaper than ever to attract customers in China, carrier China Telecom Corp. cut back on subsidies.
Though the carrier will offer plans that reduce the extravagant cost of the handset for would-be customers, the company is forcing users to pay more upfront for the iPhone 5S than it did for the iPhone 5 last year.
For instance, if users buy a two-year data plan for 289 yuan per month ($47 per month), they have to pay 2398 yuan ($389.6) for the iPhone 5S. That compares with a charge of 1888 yuan for the iPhone 5 if a user committed to a similar plan last year. Without a plan the new iPhone 5S costs 5,288 yuan.
The large amount a customer is forced to initially spend to get the iPhone highlights the difference between carrier subsidies in China with other markets like the U.S. It also shows why the high price points in China make it so difficult for Apple to compete.
“China Telecom had already cut the handset subsidies for the iPhone 5 compared to the iPhone 4S when it launched devices.” “Regarding the same 2-year contract with a monthly fee of 289 yuan, China Telecom’s handset subsidies for the iPhone 4S accounted for 47% of the total contract value,but it has dropped to 39% for the iPhone 5 and 31% for iPhone 5S.”
"Just as analysts are arguing that the new iPhones needs to be cheaper than ever to attract customers in China, carrier China Telecom Corp. cut back on subsidies.
Though the carrier will offer plans that reduce the extravagant cost of the handset for would-be customers, the company is forcing users to pay more upfront for the iPhone 5S than it did for the iPhone 5 last year.
For instance, if users buy a two-year data plan for 289 yuan per month ($47 per month), they have to pay 2398 yuan ($389.6) for the iPhone 5S. That compares with a charge of 1888 yuan for the iPhone 5 if a user committed to a similar plan last year. Without a plan the new iPhone 5S costs 5,288 yuan.
The large amount a customer is forced to initially spend to get the iPhone highlights the difference between carrier subsidies in China with other markets like the U.S. It also shows why the high price points in China make it so difficult for Apple to compete.
“China Telecom had already cut the handset subsidies for the iPhone 5 compared to the iPhone 4S when it launched devices.” “Regarding the same 2-year contract with a monthly fee of 289 yuan, China Telecom’s handset subsidies for the iPhone 4S accounted for 47% of the total contract value,but it has dropped to 39% for the iPhone 5 and 31% for iPhone 5S.”
