Apple Shares Trend Down On News Of Chinese Telecom’s iPhone Subsidy Cutback


In what may be a sign of things to come, Apple Inc. (NASDAQ: AAPL) shares continued their downward slide today after news that China Telecom Corporation Limited (NYSE: CHA) appeared to be cutting back on subsidies for the iPhone. As of this writing, shares are down by 2.79 percent since the open of the market this morning. According to The Wall Street Journal, CHA is pressing users to pay more upfront for the iPhone 5S than it did for the iPhone 5 last year. Consumers who purchase a two-year data plan for 289 yuan per month (about $47) have to pay 2398 yuan (about $389.60) for the iPhone 5S.

Apple has had a rough week since the company unveiled its new iPhone 5S and 5C models. Shares have fallen nearly 10 percent since then, with analysts citing that the price on the iPhone 5C was higher in China than had been expected. This news has raised concerns on Wall Street about the company’s growth prospects in the Chinese market. China Telecom’s surprise cutback on subsidies is only adding fuel to a rapidly growing fire.

In another blow, Apple was downgraded by three major banks last week in reaction to the début of the new iPhone models. Shares were slashed to a neutral rating from buy by UBS (NYSE: UBS), which also decreased its price target to $520 from $560. UBS analysts rightly believe the iPhone 5C will face stiff competition from Android devices, which are 40 percent to 50 percent cheaper in the Chinese market. Also citing pricing concerns, Apple shares were downgraded to a neutral rating from outperform by Credit Suisse (NYSE: CS) and were cut to a neutral rating from buy at Bank of America (NYSE: BAC). Aside from price, concerns were raised about the dual launch with several analysts certain that it will be a negative event for the stock in the near-term. Seems they may have been right.

There are myriad reasons as to why Apple’s shares are down Monday, but the company’s unusual decision to not announce preorder figures for its iPhone 5C has got to be adding to the issue. This is the first time in four years that Apple has not released iPhone preorder numbers for a respective device’s first 24 hours of availability. It’s highly possible that the iPhone 5C might have softer demand than the company anticipated. Whatever the reasons for not releasing the information, it does act as an indicator to investors that something may be amiss with sales.

The bottom line is that the company’s declining stock price is bracketed with speculation at this point. Still, shareholders and analysts must be seeing something they don’t like, as the stock continues to slip. Hopefully, Apple is paying attention.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.