Apple recently reported its first drop in iPhone sales since the iconic handset was launched in 2007, with Greater China suffering the sharpest drop globally.
While iPhone sales in mainland China fell 11 per cent in Q1, the wider region, which includes Hong Kong and Taiwan, saw sales drop 26 per cent.
The results in the mainland mean that iPhone sales in Hong Kong and Taiwan must have plunged by far more than 26 per cent during the quarter. Apple doesn’t break down sales by country (except for mainland China).
Telecoms operators’ revenue has certainly been shored up over the past few quarters by brisk iPhone sales. But that robust run is likely over for many mobile players, at least in the short term.
Hong Kong’s SmarTone is a poignant example. Its revenue jumped 33 per cent to HKD8.67 billion ($1.12 billion) in Q4 2014, with handset and accessory sales of HKD5.92 billion dwarfing its service revenue, which fell 2 per cent to HKD2.74 billion.
That was not an isolated case. Hutchison Telecom’s 35 per cent increase in mobile revenue to HKD12.6 billion in Q4 2014 was fueled by a 90 per cent jump in mobile hardware revenue. But mobile service revenue fell 10 per cent to HKD4.64 billion. The surge in hardware turnover, which accounted for 63 per cent of total mobile revenue, was driven by strong sales of the iPhone 6, the company said.
Singtel in the same quarter reported a 2 per cent increase in mobile revenue in Singapore, but that modest growth was driven by a 37 per cent jump in equipment sales.
Reversal of fortune
Five quarters later, the writing is already on the wall.
Yesterday StarHub, Singapore’s second largest operator, posted a 2.4 per cent drop in mobile service revenue to SGD298 million ($220 million), with the sale of equipment falling 37 per cent to SGD48.6 million. The company said the fall was due to a decline in the volume of handsets sold and a lower average selling price, which no doubt was referring in large part to weakening sales of the expensive iPhone line.
While the iPhone is not the only brand driving equipment sales, it has accounted for the lion’s share of growth at many operators over the past few years. This shows how dependent operators have become on hot new models to drive their revenue growth.
The impact of declining iPhone sales will be far and wide – sales were down 25 per cent in Asia (ex China and Japan) and 10 per cent in the Americas. But with Apple feeling the most pain in Hong Kong and Taiwan, expect a reversal of fortunes for mobile operators in those territories as they report Q1 earnings, and likely well beyond that as analysts don’t see sales recovering until Q3 at the earliest.
Operators are surely praying for a more compelling and successful iPhone 7.
The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.