Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Don’t Look Now, But Apple Inc. (AAPL) Is Failing in Russia

It looks like T MOBILE US INC (NYSE:TMUS) isn’t the only company out there that’s had it up to “here” with the high cost of subsidizing iPhone sales.

Over in Russia, market-leading cell phone provider Mobile TeleSystems OJSC (ADR) (NYSE:MBT) has just confirmed that, as of 2012, it no longer sells Apple Inc. (NASDAQ:AAPL)‘s new iPhone models to its customers directly. The company does still stock, and sell, some older iPhone models. But for iPhone5 and on up, MTS now answers phone calls from Apple with a Spasibo, ne nada. (“Thanks, but no thanks.”)

Of course, being in the cell phone business, MTS does have to sell its customers some phones, right? So what are they going with, if not the ever-popular Apple?

Take your pick
Apple Inc (AAPL)After hearing about the Great Russian iPhone Dump, I asked MTS to comment. Its response: “In late 2012, MTS didn’t sign a new commercial agreement with Apple Inc. (NASDAQ:AAPL) as the parties failed to agree on the terms of partnership. As a result, iPhone 5 models weren’t available in the MTS retail stores.” Today, MTS has agreements in place to promote smartphone choices from Samsung, Nokia Corporation (ADR) (NYSE:NOK), and HTC — but not Apple.

The reason is simple. For years, MTS has been “unhappy” with the prices Apple Inc. (NASDAQ:AAPL) charges for its iGadgets. MTS CEO Andrei Dubovskov notes that, because cell phone customers in Russia are generally of the “prepaid” variety, paying Apple high prices for iPhones is no longer economically viable. MTS can’t make up the cost of the subsidies by locking customers into long-term, hi-price contracts, as AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ) do here in the states. As a result, the iPhone was costing MTS money, and leaving it with a “negative margin” on the product.

MTS was similarly unhappy with an Apple Inc. (NASDAQ:AAPL) demand that it commit to buy a certain numbers of iPhones in order to gain access to new iPhone models at all. But, as it turns out, MTS may not need that access.

Who needs an Apple a day, anyway?
This week, cell phone tech site is reporting that Nokia Corporation (ADR) (NYSE:NOK)’s new line of Lumia Windows Phones, powered by Microsoft Corporation (NASDAQ:MSFT)’s operating system, have been selling just as strongly in Russia as Apple Inc. (NASDAQ:AAPL)’s iPhones. Indeed, MTS confirms that, around the time it dumped Apple last year, it signed a partnership agreement with Microsoft Corporation (NASDAQ:MSFT) to promote smartphones, such as the Lumia, that run Mr. Softie’s software. The fact that Lumias cost a mere fraction of the iPhone price — MTS’s CFO once told me that iPhones were selling for about $1,000 a pop on the open market in Russia — probably doesn’t hurt the phones’ appeal.

Meanwhile, the absence of iPhones on its store shelves doesn’t seem to be hurting MTS. As of Q1 2012, Russian market researcher Advanced Communications & Media scored market share among Russia’s biggest telcos like this:

As of today, Bloomberg reports that MTS remains No. 1. So it seems … MTS doesn’t actually need the iPhone to succeed in the marketplace. Apple Inc. (NASDAQ:AAPL) investors had better hope that other telcos, in other markets, don’t reach the same conclusion.

The article Don’t Look Now, but Apple Is Failing in Russia originally appeared on and is written by Rich Smith.

Fool contributor Rich Smith owns shares of Apple. The Motley Fool recommends Apple Inc. (NASDAQ:AAPL). The Motley Fool owns shares of Apple and Microsoft.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.