VimpelCom, which sells phones under its Beeline label, has finally joined its main competitors MTS and MegaFon in dropping the iPhone from its line-up. It will instead be offering the Samsung Galaxy S4 to its customers, citing “draconian contracts” and “harsh conditions… especially in the marketing department” with Apple.
Together, the three companies combine for nearly 80 percent of the market share in Russia, and while Apple does not pull in huge revenue from the country yet, reports indicated that the country and its 180 million subscribers will expand to become the 7th largest marketplace in the world by 2018.
The largest of the three, MTS, dropped the iPhone at the end of 2012 and jumped to Microsoft Windows Phones, blaming subsidies and market costs as the biggest part of its decision to Bloomberg.
“Apple wants operators to pay them huge money, subsidizing iPhones and their promotion in Russia,” Chief Executive Officer Andrei Dubovskov said. “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.”
315,000 units Windows Phone units have been sold by MTS since then and the OS had an 8.2% share of the market in the first quarter of 2013, up from a 5.1 percent share a year earlier. Since MTS dropped the iPhone the device’s market share dropped from 9 percent to 8.3 percent.
Fortune‘s Philip Elmer-Dewitt believes another reason that the iPhone is being abandoned is that strict government regulations from a federal agency called Roskomnadzor keeps subsidies in check, and it does not allow buyers subsidized pricing options, such as an iPhone 5 for $199 instead of its full price.
In regards to price, the iPhone also sold for roughly $918 in Russia, $269 more than the $649 price tag in America. Apple claims that $140 goes to Russian VAT (value-added tax) and $129 goes to the exchange rate. Regardless, the inflated pricing does not look good on the grand scale, especially when put next to the other upcoming phones in the area.
The iPhone can still be purchased through Svyaznoy, a privately owned chain started by billionaire Maxim Nogotkov.
Losing the three largest providers and nearly a percentage point of its market share does not spell out a good future for the phone in Russia. It is not yet known how Apple plans to regain its footing in the country, though we know it has plans for its own Apple Store and that at least one third party store still sells the iPhone.