Apple (Nasdaq: AAPL) and China Mobile (HKEx: 941: CHL) have announced that they have reached an agreement and as a consequence Apple’s iPhone 5s and 5c will be launched on China Mobile’s 4G and 3G networks. “China is an extremely important market for Apple and our partnership with China Mobile presents us the opportunity to bring iPhone to the customers of the world’s largest network”, commented Tim Cook, Apple CEO along with the release.

According to a recent report, China, Hong Kong and Taiwan jointly account for 39% of the global Smartphone market where Apple ranks 5^th in the region’s Smartphone sales. It was, therefore, no wonder when analyst predicted that the deal could lead to 12.5 million to 30 million more iPhone sales.

However, the market reaction to this long awaited agreement seems to be rather mixed. While most agree that with the introduction of cheaper iPhone, Apple has taken a step towards catering to China, the world’s largest Smartphone market and one that is crucial to the company’s future, they also wonder whether Apple will benefit much out of it. The cost of the phone, many argue, which is more than $700 in China, will surely keep Apple’s phones beyond the reach of most Chinese consumers. Moreover, that predicament also underscores what has become quite clear in the current months: that Apple’s prosperity in China will largely depend not on phones, but on reaching a deal with China Mobile, the country’s largest carrier.

Nevertheless, Apple has since taken another move in the partnership, when the Chinese government announced that Apple’s phones could run on China Mobile’s new cell network, thus making it more helpful for a deal between the two companies.Even though the agreement instantly gives Apple access to China Mobile’s 700 million buyers, reaching it would probably require Apple to go relaxed in price structure. Needless to say, China Mobile, which has been holding out on a deal for several years would now find itself more positioned to outmatch Apple, so far as business terms are concerned.

China’s cellphone market, surprisingly enough, is growing much faster as compared to the American market (last two years). However, the current market trend shows an inclination toward cheap Android Smartphone’s and that can be acquired for $100 or less from handset makers such as Xiaomi, Huawei or ZTE.As for Apple, it has been left as No. 6 in the Chinese market, sales of its product in the country going down comparatively (last two years). But even then, Apple is still considered quite successful although its profit growth has stalled and its stock prices have fallen more than 5%, as of now.

As for China Mobile, it may demand that Apple subsidize the cost of iPhones, in return for adding Apple in its lineup. It might also ask for a better cut on each iPhone sale.

Conclusion

“With every passing month”, commented Tero Kuittinen , mobile analyst for Alekstra, China Mobile is getting stronger and Apple is getting weaker”.