This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Apple Has a Russian iPhone Problem

NEW YORK ( TheStreet) --In Soviet Russia, iPhone buys you.

Okay, enough bad Yakov Smirnoff jokes. Apple (AAPL - Get Report) has a real Russian problem, and I don't mean Ivan Drago from Rocky IV.

Russia's top three cell phone carriers, MTS (MBT - Get Report), VimpelCom (VIP - Get Report) and Megafon have recently made clear that they're not going to continue selling the iPhone. The three Russian carriers claim that Apple's exceptionally stringent terms over purchases, subsidies and marketing, no longer make it financially feasible to carry the iPhone.

While the decision could change at any time, it's hard to see how this doesn't negatively impact the upcoming iPhone 5S. Apple is expected to launch the phone either next month or September.

Apple officials couldn't be immediately reached for comment.

The subsidy issue is a major one, as the mobile phone federal agency in Russia, Roskomnadzor, doesn't allow the iPhone 5 to be subsidized to $199. When you factor in import duties, taxes and other associated fees, customers are paying serious money for an iPhone. A look at Apple's Russian website shows an unlocked iPhone 5 costs $918, versus $649 in the United States. Again, a huge disparity in pricing, and it's becoming not financially feasible anymore for the carriers because of lower margins.

The carriers, particularly MTS, are turning to alternative phones, including Microsoft's (MSFT - Get Report) Windows Phone. While the iPhone has never been a huge seller in Russia, as research firm IDC estimates it had just 8.3% of the Russian market in the second quarter of 2013, that's still a major problem for Apple. These carriers combined have a few hundred million subscribers, with Vimpelcom alone having more than 200 million subscribers as of the end of March. That's a serious figure, and something Apple, and investors, have to be aware of.

While Russian consumers can still get the iPhone on either the black market or other means, it's still going to impact Apple's market share in the country, and iPhone sales overall.

Apple reports fiscal third-quarter earnings on July 23 after the close of trading. Analysts surveyed by Thomson Reuters are expecting $7.32 per share on $35.1 billion in revenue.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $127.60 0.00%
MBT $11.38 0.00%
MSFT $42.90 0.00%
VIP $5.65 0.00%
FB $83.09 0.00%

Markets

DOW 18,034.93 +208.63 1.17%
S&P 500 2,100.40 +19.22 0.92%
NASDAQ 4,994.6020 +62.7870 1.27%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs