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No Love From Russia for iPhone

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Anybody who wants to buy an iPhone in Russia needn't bother going to any of the Russian mobile operators. VimpleCom (NASDAQ: VIP  ) , the last Russian telecom offering the iPhone, has just hung up on Apple (NASDAQ: AAPL  ) , according to Russian language website Hi-Tech Mail.

VimpleCom, a joint venture of Norwegian telecom Telnor and the Russian Alfa Group, operates under the BeeLine brand in Russia. BeeLine has joined the two other ex-iPhone carrying Russian heavyweight mobile carriers, Megafon and Mobile TeleSystems (NYSE: MBT  ) , and not renewed its iPhone contract with Apple.

The three Russian carriers all had signed up to carry the iPhone in 2008, but high import taxes pushed the price of the iPhone above $900 in a country that bans subsidies. And Apple wouldn't cut any special deals with the operators.

"Apple wants operators to pay them huge money, subsidizing iPhones and their promotion in Russia," MTS CEO Andrei Dubovskov told the Seattle Times in an interview. "Now it's not beneficial for us. It's good we stopped selling the iPhone as these sales would've brought us a negative margin."

Mobile Telesystems (MTS) stopped selling the iPhone at the end of 2012, and began promoting the Nokia (NYSE: NOK  ) Lumia smartphones in its stores. Those phones use Microsoft's  Windows Phone OS, which has seen a rise in Russian market share from 5.1% in the first quarter of 2012, to 8.2% in this year's first quarter. That's right up there with the iPhone, which has seen its market share drop in Russia, from 9%, to 8.3% for the same periods.

VimpleCom has signed a deal with Samsung to provide smartphones directly to its Russian carrier, according to Hi-Tech Mail.

The iPhone is not forbidden in Russia; it will still be available through Apple's online store and from Svyaznoy, a mobile phone retail chain, along with other Apple products. If someone wants to buy an iPhone and bring it to a Russian mobile network, no problem. Just don't expect the carrier to help pay for it.

So it looks like Apple is on the decline in Russia, and Microsoft is on the move, at least in the mobile world. It's incredible to think just how much of our digital and technological lives are almost entirely shaped and molded by those and just a few other companies. Find out "Who Will Win the War Between the 5 Biggest Tech Stocks?" in The Motley Fool's latest free report, which details the knock-down, drag-out battle being waged by the five kings of tech. Click here to keep reading.

Read/Post Comments (4) | Recommend This Article (3)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 17, 2013, at 9:25 AM, fauxscot wrote:

    Russians by the iPhone for the same reason Americans do. It's classy, supported, high status, and it works.

    The slight reduction in market share still results in a profit, unlike the big jump in windows phone. Only in the days of the USSR were profit-free organizations deemed a good idea.

  • Report this Comment On July 17, 2013, at 9:35 AM, spakklal wrote:

    Apple will be making more money in Russia by selling directly to consumers through their online store.

    We still have other specialty Larger Electronics store selling iPhones & iPads.

    Apple is the only company that has 3 revolutionary Products in the market. Samsung is the only company was able to compete with AAPL because they were selling featured phones for the last 20 years and have relationships with all the mobile vendors in the world. It was easy for samsung to take share in the midrange and low range of the smartphone market because AAPl was not competing in that Price range. AAPL sold 150 million iPhones in the last 12 months at an average price of $620. I believe when AAPL sells iPhone Lite and would be able to sell with more mobile vendors without any restrictions. If the price of iPhone Lite is $350 more consumers will be able to afford and will sell at least 250 million iPhone Lites with more software services.

  • Report this Comment On July 17, 2013, at 10:35 AM, demodave wrote:

    iPhones may not "sell well" in Russia, but I saw a lot of Russians using them while on vacation. I think Spakklal is right. Apple will go around the telcos and sell directly to the people. I also suspect that the rumored "low-cost" iPhone will do well. From personal experience, my AT&T iPhone worked fine on Beeline in Moscow and St Petersburg.

  • Report this Comment On July 21, 2013, at 7:22 PM, khimru wrote:

    Small correction: Apple does not need to "go around the telcos" - direct unsubsidized sales via retailers is how mobile phones were sold in Russia from the beginning.

    What Apple tried to do five years ago is to push its own risks on Russian carriers and force them to pay for advertisement. This approach obviously failed so now Apple will do what all other manufacturers are doing: pay for its own advertisements and sell phones one-at-time (and not by millions via carrier commitments).

    It's not a win for carriers and it's not a large loss for Apple - it's just means that even Apple can not push obsolete cabal US model in Russia. Perhaps it will finally relent and will start selling popular dual-SIM models like most other manufacturers, LOL.

    P.S. Last sentence was kind-of-tongue-in-cheek, but not really. Probably not this year, but who knows what'll happen in next five years...

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