Megafon and Apple Inc. (NASDAQ:AAPL) reached a new accord today which once again permits the major Russian mobile phone carrier to sell iPhones, according to Megafon company representatives.
Mobile phones and smartphones are ubiquitous throughout the former Soviet Union, making it an excellent potential market for popular telephones such as the iPhone. Nevertheless, iPhone sales volume was deemed insufficient during the companies’ previous alliance, which came to an end in 2010. Nearly four years later, however, iPhones will once more be sold directly to Russian carriers.
Sales of iPhones have been somewhat problematic in Russia for several reasons, including the fact that relatively few Russians have been able to afford the devices in the past. Apple (AAPL) iPhone sales make up approximately 9 percent of Russian smartphone purchases by numbers, a figure which has remained stubbornly constant for years. However, competitive pressure from Samsung (SSNLF), along with signs of growth in Eastern European cell phone purchases, has prompted Apple to relax its formerly stringent sales policy for distributors in the Commonwealth of Independent States (CIS).
The Russian smartphone market generates $6.5 billion in revenue annually according to 2013 figures, of which Apple’s iPhone captures roughly 20 percent. The current deal should make the world-famous communications devices more readily available to Russian consumers, since Megafon is the nation’s second largest mobile carrier. The largest carrier, MTS, has not yet made any new business arrangements with Apple Inc. (AAPL) and thus purchases its iPhones through secondary channels. The third-place firm, Vimpelcom, took advantage of Apple’s new policies even sooner than Megafon, placing orders for iPhones as early as October 2013.
Models of iPhone which are slated to be sold to Megafon and other Russian providers include the 5C and the 5S. The 5S is one of Apple’s most cutting edge smartphones, featuring the next generation CPU developed by the electronics manufacturer, plus a fingerprint sensor and improved camera. The 5C is generally less costly and differs from the base iPhone 5 chiefly in its greater array of case colors.
Megafon’s initial contract following the lifting of the longstanding sales ban calls for the company to continue purchasing iPhones directly from Apple (AAPL) for three years, or through the end of 2016. The 2012 introduction of the iTunes store to Russia probably helped lay the groundwork for higher iPhone sales, making today’s pact more appealing to the CIS communications giant.
The contract was signed by Alisher Burkhanovich Usmanov, the billionaire owner of Megafon and a number of other technology, telecommunications, mining, and gas companies. Bloomberg reported in 2013 that Mr. Usmanov invested at least $100 million in Apple Inc. (AAPL), indicating a strong ongoing business interest in the Cupertino, California firm that has led to today’s deal.
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