China Mobile, Apple is a done deal, but what does carrier get out of it?

Co-branding will prove to level playing field for domestic firm

It came as little surprise to many to read about the multi-year deal struck recently between China Mobile Ltd and Apple Inc. This deal appears to have been under negotiation for the best part of the last six years.

Since the signing, much media coverage has ensued, most of which has discussed the benefits of the deal for Apple and the iPhone in China, the largest mobile phone market in the world with an estimated 1.2 billion consumers.

But what about China Mobile? What impact will this deal have on China's dominant wireless carrier brand? Have the long-term brand-building implications really been thought through thoroughly?

Clearly, the deal helps both parties in the short term. Apple, struggling in China amid intense competition and a relatively high-priced iPhone brand, gains immediately with access to China Mobile's 700 million-plus subscribers. China Mobile would appear to gain also with the addition of such an iconic, global brand to its network. But just how much?

The deal is characteristic of many involving Chinese companies' tie-ups with famous foreign brands over the years, where the foreign partner refuses to relinquish an ounce of its brand equity and simply exploits the Chinese partner's market position in China. No better example can be found than the car industry tie-ups in China with numerous alliances between Chinese car producers and internationally famous foreign brands, such as the FAW-VW partnership that dates back to 1991. Of course FAW and other Chinese companies in similar tie-ups continue to benefit but only to a degree. FAW's now 20-year-plus relationship with Germany's VW proves a telling point; the foreign brand benefits far more with substantial enhancement to its emotional brand image.

The Chinese partner plays no part in this brand-building bonanza, merely providing low- cost production and/or accessibility to the market. FAW's entire portfolio, well-known to the Chinese public, has benefited little over the years from the VW alliance. The same cannot be said of VW's portfolio, especially the Audi brand.

In the same way as FAW has benefited, so will China Mobile gain from working with Apple. But this gain will also be limited while no co-branding takes place.

Co-branding, where both partners present their brand names on the final product visibly to the market, might appear merely a subtle alternative type of alliance of joint venture, but over many years, its effect as a catalyst, catapulting the lesser-known partner's brand, can be exponential. Ericsson (Sony-Ericsson) and Intel provide demonstrable examples.

China Mobile's brand remains dominant across China but still lacks the emotional appeal that Apple and iPhone in particular have established successfully with their loyal customer base. China Mobile, despite ranking consistently highest among the Chinese brands in many global brand rankings, also lacks international brand awareness and, therefore, remains restricted in any global brand expansion plans.

A co-branding tie-up, rather than the recent arms-length deal, could provide a golden brand-building opportunity for China Mobile. Such a deal would put the China Mobile brand name and/or logo in a prominent place on Apple's iPhone brand and begin to build a far more powerful, emotional China Mobile brand.

Apple's current poor position in the China market and China Mobile's dominance should also provide the Chinese player with sufficient power to insist on such a tie-up.

Such a relationship would also serve as a turning point for many other Chinese companies and their brand-building aspirations.

China Mobile and Chinese companies in general have so far been slow to embark on the brand-building strategies,the sine qua non of modern-day business success.

Only co-branding, with famous foreign brands such as Apple, will provide the impetus and direction needed to move China Mobile and Chinese industry in general on to the world stage.

If anything can, co-branding can!

The author is a visiting professor at the University of International Business and Economics in Beijing and a senior lecturer at Southampton Solent University's School of Business. The views do not necessarily reflect those of China Daily.