Apple Inc. (AAPL): The Key Issue Worth Watching

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Apple Inc. (AAPL)It’s been a year since Verizon Communications Inc. (NYSE:VZ) and AT&T Inc. (NYSE:T) went on record as fans of Nokia Corporation (ADR) (NYSE:NOK)‘s then-new Lumia 920, running Microsoft‘s new Windows Phone OS. Why would the two undisputed leaders in mobile-phone sales, both of which had already profited handsomely from their respective relationships with Apple Inc. (NASDAQ:AAPL) , go on record as rooting for the “other guy”? Because at the time, Apple could call the shots, even to wireless leaders like Verizon Communications Inc. (NYSE:VZ) and AT&T Inc. (NYSE:T) — and it did.

Now, fast-forward a year to the drastically changed mobile computing world of today. Samsung is the No. 1 mobile-phone company in the world, there are more smartphone alternatives for consumers to choose from than ever before, and Apple Inc. (NASDAQ:AAPL) is still trying to dictate iPhone subsidy specs to wireless carriers around the world.

The issue
Domestically, things haven’t changed much for Apple Inc. (NASDAQ:AAPL); it still rules the smartphone roost, and U.S. consumers benefit by getting iPhones for a fraction of the non-subsidized price. While iPhone sales jumped to 37.4 million units last quarter, the 6.5% increase that represented from the year-ago period was woefully shy of the 36% jump in overall smartphone sales, and it was the smallest gain since the iPhone was introduced.

Even more concerning for iFans is the lack of international smartphone growth, and it’s in the overseas markets that changes need to be made in Apple Inc. (NASDAQ:AAPL)’s overly confident attitude. There are literally billions of potential smartphone customers worldwide who either don’t have the benefit of smartphone subsidies or have wireless carriers unwilling to kowtow to Apple’s demands. The most notable carrier unwilling to bend also happens to be the largest in the world: China Mobile (NYSE:CHL) .

China Mobile’s recent partnership with Nokia Corporation (ADR) (NYSE:NOK) should be a model for Apple Inc. (NASDAQ:AAPL) of how things are supposed to work with international carriers. When Nokia introduced its Chinese market-ready Lumia, the two were able to work out a deal in which China Mobile would subsidize virtually the entire cost, along with the usual data plan contract. Why was “little” Nokia Corporation (ADR) (NYSE:NOK) able to work out a subsidy deal with China Mobile for a phone that retails for about $740? The negotiations weren’t made public, of course, but it stands to reason that Nokia Corporation (ADR) (NYSE:NOK) needed to bend a bit to make the China Mobile deal a reality, and that’s the lesson Apple needs to learn to get back on the growth path.

While it is the largest, China Mobile is hardly the only international carrier unwilling to play by Apple Inc. (NASDAQ:AAPL)’s rules. According to an analyst with Asymco, Apple has about 240 carriers worldwide offering its stable of iPhones, and less than a dozen of those have been added in the past three years. By comparison, Samsung has agreements with about 840 carriers around the world.


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