A potential iPhone agreement between Apple (NASDAQ:AAPL) and China Mobile (NYSE:CHL) may be facing a big roadblock after the Chinese government expressed concerns about subsidies for the device. A Deutsche Bank analyst who spoke with officials from the wireless provider wrote in a research note that the country’s government, which controls the carrier, is opposed to a potential licensing deal because of the “heavy subsidy burden.”
“We believe that the stars are not aligned for a China Mobile licensing of the iPhone 5,” the analysts wrote, according to MarketWatch. “The government is not supportive.”
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China Mobile is the world’s largest wireless provider by number of subscribers and the only one of the three major operators in China to not have a deal with Apple. Rivals China Unicom (NYSE:CHU) and China Telecom (NYSE:CHA) already sell Apple’s previous versions of the smartphone and are expected to get the iPhone 5 in the next few months.
Speculation regarding Apple and China Mobile reaching a deal soon has persisted, considering the provider’s hold on the country’s market with its 700 million subscribers. A teardown of the iPhone 5 also found that the device’s baseband chip was compatible with the operator’s 3G network with some minor modifications.
China Mobile said in August that it would raise its handset subsidy target for the current year to 26 billion yuan, or $4.1 billion, up from an initial 21 billion yuan. In the first half of the year, its handset subsidies totaled 12 billion yuan.
Interestingly, Apple’s online as well as physical retail stores in China sell the iPhone at full price and leave it up to the carriers to offer their own discounts.