Russia’s #3 carrier Beeline drops iPhone over ‘harsh conditions’

By , Jul 12, 2013

iPhone 5 (Beeline 001)

Looks like Apple’s just been dealt a major blow over in Russia as another carrier reportedly quit selling iPhones. Vimplecom-owned Beeline, the nation’s third-largest wireless carrier, has allegedly cut its ties with Apple. The firm will not renew its iPhone distribution agreement over too “harsh conditions”, the story goes.

While the move doesn’t mean the iPhone isn’t popular in the country (just ask the local elite and celebrities), it does leave Apple without a major carrier presence there. Russia’s two biggest carriers MTS and Megafon stopped selling the handset earlier.

Both telcos criticized Apple’s demanding requirements: committing to large-volume purchases, generous subsidies and advance payment…

The news couldn’t have come at a worst time for Apple: the company has just suffered a major blow in the iBook case ruling, Wall Street is projecting virtually flat growth and EU governments are investigating Apple’s tax practices.

A report by Hi-Tech (via phoneArena) claims Beeline instead singed an agreement to sell Galaxy phones because Samsung offered more favorable terms. Apple’s share of Russia’s smartphone market fell from nine percent in the first quarter of 2012 to 8.4 percent a year later.

Beeline logo (medium)

Apple’s stringent sales terms have already drawn ire of European telcos which filed a complaint with the European Commission over the way the iPhone maker goes about conducting its business.

Meanwhile, over in the United States the leading carrier Verizon found that carrying the iPhone has exposed the company to a major risk of owing Apple a whopping $14 billion in unsold inventory.

apple store russia

It’s interesting that back in 2008 MTS, Megafon and Beeline all became the official iPhone distributors in Russia, but five years later none of them offers the handset anymore.

Curiously enough, both MTS and Beeline are still on Apple’s list of iPhone carriers.

Chief  Hi-Tech analyst Dmitry Ryabinin has another explanation:

This decision might be connected to the fact that Vimpelcom signed a contract with Samsung. Moreover, Apple is getting ready to open its own retail store chain in Russia and is not interested in having many third-party vendors.

Apple’s conditions are harsh, especially in the marketing department, and are not always beneficial for its partners. That’s why Vimpelcom’s decision looks logical.

Carrier MTS stopped selling iPhones in its stores at the end of 2012.

Company CEO Andrei Dubovskov told Bloomberg:

Apple wants operators to pay them huge money, subsidizing iPhones and their promotion in Russia. 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.

Russia is important.

iPhone 5 (two-up, front, back, flat)

Home to 143 million people, the vast country along with Brazil, India and China is expected to zoom past the United States to emerge as the world’s top smartphone markets by 2018.

Apple suffers from virtually non-existent store presence in Russia. Excluding authorized resellers, it just recently launched the online store in Russia, marking its first retail presence in a major emerging market.

Currently, only the Svyaznoy chain of stores has an official deal with Apple to sell iPhones.

The Russia iTunes Music Store opened for business last December and with iOS 7, Apple will be adding Yandex, the country’s dominant search engine, as the default Safari search engine.

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  • Liam Mulcahy

    apple is failing :(

    • Saeed Ghattas

      As nobody said before! Keep on dreaming!

  • Silvelix

    They have to change their strategy on this area. They are failing so hard.

    • Saeed Ghattas

      They won’t. This is how they work. If this is not working they will figure out other ways.

  • Alan Absalon

    Is it because of colder climates? (i.e., resistive touch screens are better)?

    • Ksain

      For now it’s about 94 degrees of fahrenheit in my city in Russia. And 81 degrees is normal weather temperature all over the country.

      And about 30-60 degrees in winter, besides northen parts of the country, which is really cold even for us.

      Believe me, our touch screens works just fine most of the time.

  • n0ahcruz3

    Apple should change their strategy regarding carriers or else one by one they are gonna drop the iphone

  • Edik

    I am russian.

    although it’s sad, but the truth is that most of the russians are pretty poor.

    I am not talking about people who live in Moscow or other big cities.

    many of them have salary of about 100$/month. 5% percent of population are pretty rich = about 6-7 million who can afford an iphone. Russia is a small market.

    apple has an official store there, and it’s more than enough.

    apple should try to reach a deal with china mobile and domoco, which are much more important.