By Don Reisinger
May 3, 2016

Apple had high hopes of selling pre-owned iPhones in India. But those hopes might have been dashed.

The tech giant’s application to sell refurbished iPhones in India has been rejected, an unidentified telecommunications ministry official told Bloomberg on Tuesday. It’s unclear why Apple’s (AAPL) application was denied.

Apple has been quietly lobbying Prime Minister Narendra Modi’s government to sell refurbished iPhones to customers in India as part of a broader effort to grow its market share in that country. While Apple has relied heavily on the Chinese market, its presence in China is starting to slip, prompting it to increasingly focus attention on India, where it currently has 2% smartphone market share.

However, India has been somewhat difficult to deal with for most Silicon Valley companies. The country has several laws in place that restrict an American company’s ability to operate within its borders, including requiring companies to source 30% of their products from Indian companies before they can open their own branded stores in the country.

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Still, India is booming, and its middle class is growing rapidly. Most major technology companies are vying for a slice of that market, realizing that as more people come online, they’ll want smartphones.

Seeing an opportunity, Apple applied in January to open retail stores in India despite not sourcing 30% of its products’ components from Indian companies. A report last week claimed that a panel evaluating Apple’s proposal would recommend the company get a special exemption from the rule for delivering “cutting edge” and “state-of-the-art” products. India’s Finance Ministry will ultimately need to make the final decision on the matter.

Until then, Apple needs to find a way to get its iPhone into Indian customers’ hands. The company, which is loath to charge too little for its products, had reportedly hoped that selling refurbished iPhones could help it gain more traction in India, where affordability reigns supreme.

During an interview on Monday on CNBC’s Mad Money with Jim Cramer, Apple CEO Tim Cook acknowledged how important India would be to his company’s future. He noted that India would “be the most populous country in the world in 2022,” and strategically for Apple, the country is extremely appealing.

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“India today has about 50% of their population at 25 years of age or younger,” Cook said. “People really want smartphones there, really want smartphones. And this year, the first year, LTE begins to roll out. And so many of your viewers here in the United States, they’re used to using LTE and streaming video. And hopefully they’re getting a good experience there. In India you can’t do that long—there is no LTE. And so that’s changing. Huge market potential.”

Cook added that Apple is “really putting energy in India.”

Still, India is proving to be a difficult market to break into, and if the latest setback is true, Apple will need to find another way to build its iPhone market share there.

Apple did not immediately respond to a request for comment.

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