Analysts say that the official launch of the iPhone on China Mobile could lead to subsidy wars as Chinese carriers compete to attract buyers. The predictions, quoted by Business Insider, follow price cuts by rival carriers China Unicom and China Telecom as China Mobile reports 1.2 million pre-orders.

China Mobile is currently offering the iPhone 5s free with a 24-month contract costing the equivalent of $98 a month. A 30-month contract on China Unicom costs $63 a month.

I do think you’re going to see a subsidy war coming,” said Michael Clendenin, managing director of Shanghai-based RedTech Advisors. “China Mobile, if they’re not making their targets on sales for these phones, they’re going to increase the subsidies […] It’s like airlines: the other guys will fall like dominoes, so China Unicom will do it and China Telecom will do it” … 


CK Lu, a Gartner analyst based in Taiwan, agrees.

You need to consider the cannibalization for sales to China Unicom, China Telecom and the grey market, so even though there’s an addition from China Mobile it will also impact sales from other channels as well.

The grey market refers to handsets smuggled into China through Hong Kong, then used on the China Mobile network. It has been estimated that there may have been more than 40 million handsets already in use on China Mobile prior to the official launch, though if the number is true it almost certainly includes a great many iPhones several generations old.

Others, however, think it unlikely that China Mobile would engage in a price-war, instead relying on its data speeds to attract customers. An informal test by the WSJ found that China Mobile was delivering twice the download speed of smaller rival China Unicom.

One thing all seem agreed on, however: any subsidy wars that do take place won’t affect whatever deal Apple has already agreed with the carriers – its margins will remain safe.

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