An Arrogant Apple Annoys Russians

If Apple (Nasdaq: AAPL  ) wants to sell more iPhones in Russia, according to that country's largest wireless operator, it's got to stop acting like a ... well, like a "dictatorship." Executives from OAO Mobile TeleSystems came in from Moscow to attend an event in New York, when the carrier's vice president of marketing painted a vivid picture of Apple's relationship with his company, according to Bloomberg.

"They're more in a dictatorship mode where they say, 'This is what you have to do or you don't get the iPhone.' Being arrogant with your partners in big markets doesn't pay off," said Vasyl Latsanych.

The problem is that the iPhone costs over $1,000 in Russia and is competing against other smartphones that can cost much less. Another MTS vice president, Michael Hecker, would like Apple to lower the iPhone's price or contribute to its subsidization. MTS would also like Apple to back off on the stringent retail demands it places on iPhone carriers.

"If Apple showed more flexibility, then they would have a higher penetration in our markets," Hecker said.

Unlike Verizon (NYSE: VZ  ) , AT&T (NYSE: T  ) , and Sprint Nextel (NYSE: S  ) , most Russian carriers don't sign many customers up for long-term contracts and therefore can't afford to subsidize an iPhone purchase on their own. These U.S carriers typically charge their customers around $199 for an iPhone under a two-year contract.

It's one thing thinking that a powerful company is a dictatorship, and quite another to actually come right out and say it. Perhaps, after realizing the possible repercussions of dissing the most influential high-tech company of our time, MTS backed off somewhat on its criticism.

"While we have differences with Apple, we have a constructive relationship," the company said in a statement. MTS serves over 100 million customers in Russia, Ukraine, and other countries in the region.

After missing Apple watchers' iPhone sales estimates in the second quarter -- 26 million sold, compared with 28.4 million expected to be sold -- maybe Apple should rethink its corporate hubris, at least while Samsung is cleaning its clock in overall global smartphone sales.

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Fool contributor Dan Radovsky owns shares of AT&T. The Motley Fool owns shares of Apple. Motley Fool newsletter services have recommended buying shares of Apple and creating a bull call spread position in Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days. The Motley Fool has a disclosure policy.


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  • Report this Comment On August 01, 2012, at 10:33 AM, ryanalexanderson wrote:

    Foreign companies have a poor track record of making profits in Russia due to what IKEA's management coyly calls "unpredictable administrative procedures".

    Accordingly, I understand Apple's reluctance to do anything other than the most conservative arrangements to sell their products there.

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