High Prices and Corruption Make iPhone a Bust in Russia

The iPhone has been an utter disaster in Russia, according to an interesting report penned Thursday by Svetlana Gladkova at Profy.

The Russian experience suggests that, despite howls of complaint by some consumers in markets where Apple has exclusive distribution agreements with a single or perhaps a pair of wireless carriers, where the device is sold unlocked and unsubsidized by carriers, its price simply puts it beyond the means of all but a tiny number in the current global economy.

Three major carriers sell the iPhone in Russia, having collectively agreed with Apple to sell 3.5 million units over a two year period. But they have managed to move barely 250 thousand phones in the first six months of availability, according to Gladkova, and market players there a feeling distinctly glum about prospects for meeting their goal.

Unlocked phones in Russia — where service contracts are not nearly so common as in markets such as the US and UK — sold initially for the dollar equivalent of $1000, though the market price has dipped currently to $700 – $800, which is still hardly affordable to a populace with per capita GDP of around $15,000.

Corruption also hampers legitimate iPhone sales in Russia, where some 400,000 black market devices made it into circulation before the official release, according to Gladkova, soaking up early demand and deflating the impact of continued heavy advertising by the country’s three service providers.

Now, carriers and their retail partners — local distributors on the hook for millions of dollars in ancillary distribution agreements — are playing hot potato with millions of unsold phones while the carriers scramble to rewrite their contracts with Apple.

The chaos in the Russian market makes things here in the West seem downright orderly, where, ironically, an 8GB iPhone 3G can be had for under $100.

Image – Russian exclusive SimaPhone by Denis Simachev

Lonnie Lazar

Lonnie Lazar is a writer-musician-web designer-attorney. He writes about Apple for Cult of Mac and Mac|Life, and about VoIP and telecommunications for Voxilla. Follow Lonnie on Twitter @LonnieLazar, join the Cult of Mac on Facebook, and find Lonnie’s photos on Flickr.