Apple (AAPL) iPhone sales rise in Ukraine, expected to displace ‘gray market’ sales

The former Soviet Union countries represent an area of the world with low market penetration by Apple Inc. (NASDAQ:AAPL) and few or no brick and mortar stores on the ground. Troubled by weak economies, corrupt and undemocratic governments, and convoluted legal systems, these nations are usually unable to muster the businesses with impeccable credentials, stable structure, and established professionalism that Apple prefers to deal with.

Nevertheless, the FSU nations are a large potential market where Apple’s Asian competitors are currently running rampant thanks to their less stringent selling requirements. Samsung, LG, Huawei ,and others all sell to a population which makes heavy use of cell phones and smartphones of all types. Mobile phones are used for everything from business deals to arranging for apartments, talking between family members in different rooms to coordinating medical staff, as any visitor to an Eastern European country can attest.

Apple recently established its presence in war-torn Ukraine, a country fighting against a Russian-backed insurgency which aims to keep this large and relatively advanced nation from moving closer to the West and out of Vladimir Putin’s neo-Soviet sphere of influence. Though Cupertino firm has no branches within Ukraine, it has begun to sell iPhones directly through a licensed distributor, Cypriot company ASBIS. Apple is also using ASBIS to begin official sales in the dusty, remote Central Asian republic of Kazakhstan.

Led by Vladimir Kirichenko, the Ukrainian ASBIS branch has thus far sold 8,000 legal iPhones in the nation of 46 million people, Ukrainian business news website Kapital reports (in English). There are currently 1.3 million iPhones in use in Ukraine, mostly acquired through the quasi-legal “gray market,” with 400,000 new users added year-over-year compared to 2013 usage figures of 900,000 iPhones. The biggest three mobile operators offering iPhones are MTS Ukraine, Kyivstar, and Life :) Ukraine.

Currently, legal iPhones cost 11,000 Ukrainian hryvnia to acquire, or around $912. “Gray market” iPhones sell for around $664. Nevertheless, Kapital reports that various analysts project that 8.6 million iPhones will be in use in Ukraine by 2018, and that 90% of these will be legal handsets.

This massive shift is likely to be propelled by the availability of official service and customer support for legal iPhones, which is not available for “gray market” smartphones. Other companies’ phones have shown a similar pattern in Ukraine, providing an objective basis for the projection. The iPhone is also highly praised by Ukrainian consumers, meaning it is likely to partially displace its competitors as legal retail sales continue to mushroom.