The Top 3 iPhone 5 Storylines Investors Must Watch For Next Week

This Tuesday at 1 Eastern/10 Pacific, The Motley Fool's top analysts will be hosting a live blog breaking down what Apple's iPhone 5 press conference means for investors. The best part? They’ll also be taking any questions you have about the phone and Apple as an investment as well. Make sure to set a reminder to come back to Fool.com this Tuesday for all your iPhone 5 news and analysis!

The wait is over; the curtains should be taken off the iPhone 5 this Tuesday. Apple (Nasdaq: AAPL  ) fans and investors can rejoice. The launch will spur another round of buying as consumers who've been waiting throughout the summer open up their wallets for the newest iPhone upgrade.

However, aside from the near-certainty of a new iPhone, plenty of questions remain. As investors watch Apple’s announcement on Tuesday, here are three key areas that could put further fuel behind Apple’s rise to the top.

Area to Watch No. 1: Distribution. When will it be available internationally? Will Apple unveil new China partnerships? Will new U.S. partnerships open up?

Apple's growth is increasingly focused overseas as its products gain a foothold in foreign markets. China is a key market; year-to-date sales to Greater China total about $8.8 billion, or about 11% of Apple's total sales.

That's stunning, because Apple has only six stores in China -- three in Shanghai, two in Beijing, and one in Hong Kong. Most of the growth is driven by Apple's partnership with China Unicom, a wireless carrier that covers just 12% of the population. That leaves plenty of untapped opportunity within the market.  There are reports Apple is in discussion with both China Telecom and China Mobile (NYSE: CHL  ) , carriers that server greater than half the entire Chinese population.

Source: Company filings. Subscriber counts are end-of-2010 figures as presented in last available 10-K filings.

China Mobile has long been pursuing the iPhone. Reuters reported that Steve Jobs himself met with executives in hopes of working out an agreement to get the iPhone on their network. To be sure, the Chinese market is unique and Apple is seeing a high degree of sales to China Mobile customers even if the iPhone isn't officially sold for use on its network; more than 7 million China Mobile subscribers use the iPhone. However, getting its phone sold through the network opens up a huge new opportunity and makes the phone readily accessible to a huge new market.

Apple won't necessarily announce a partnership with China Mobile at Tuesday's event. However, it's hard to imagine that the company won't make a strike for a placement on the world's largest wireless carrier in the near future. More likely is that Apple will announce a partnership with Sprint Nextel (NYSE: S  ) . Sprint has about 50 million subscribers -- 27.7 million of them valuable postpaid subscribers on Sprint's CDMA network that are locked into contracts -- and could provide a huge new sales channel within the United States.

Area to Watch No. 2: Will there be one design, or two?

It's no secret that Google's (Nasdaq: GOOG  ) Android has become the chief competitor to the iPhone.  According to researcher Gartner, in the second quarter Android controlled 43% of the worldwide smartphone market, compared with Apple's 18%.

The rise has been primarily fueled by offering a variety of handsets across different price ranges -- and there's also the fact that smartphone growth is increasingly moving to emerging markets where the cost per phone is less. Naturally, this has fueled speculation that Apple would be enticed to offer a cheaper iPhone model that's more attractive in these markets. The three scenarios tossed around in how Apple will handle a lower-priced iPhone offering goes as follows:

  • Follow the path already taken: Release a brand new iPhone 5, and continue selling the iPhone 4 as a "budget" offering at a lower price point. Apple has had plenty of success in the current generation selling two-year-old 3GS iPhones to more budget-conscious consumers.
  • Create a better iPhone 4 for value-focused customers:  Under this scenario, Apple unveils a new "iPhone 4S" that's similar to the iPhone 4 but offers some notable improvements. Theories abound, including an iPhone 4 model with a "teardrop shape" that would sell for less. This could be significant because it'd show a change in Apple's philosophy toward the low end. Rather than selling an increasingly dated product for cheaper, the company would upgrade the previous version to add more value in consumers' eyes.
  • Introduce a prepaid offering:  The least likely scenario, but one of the most often discussed, is that Apple would release a new iPhone offering that would sell to carriers at maybe half the iPhone's unsubsidized cost ($300, versus the iPhone's $600-plus average selling price). This would be the most drastic change Apple could take, and it's unlikely given the company's success in selling older phone versions at cheaper costs.

Area to Watch No. 3: Could there be any blockbuster surprises?

There are two persistent rumors about the iPhone 5 that probably will not come true. Finally, there's one improvement that's nearly certain.

  • It won't have LTE: Both Verizon (NYSE: VZ  ) and AT&T (NYSE: T  ) have been working aggressively to build out their next-generation LTE (or 4G) networks, which offer much higher data speeds. Unfortunately, the chipsets inside phones that provide LTE connections are still relatively new and drain a bit too much power for Apple's liking. Far more likely is that Apple will provide support for the not-quite-4G-but-still-speedy HSPA+ standard used on AT&T's network.
  • It won't have NFC: Another recurring rumor about the iPhone 5 is that it'll have near-field communications. Apple's been known to surprise, but the technology is once again in its infancy, and Apple appears ready to take a pass on NFC this generation. That's a blow for investors in companies promoting NFC, such as NXP Semiconductors (Nasdaq: NXPI  ) . However, as the technology matures, Apple is likely to include some next-generation payment system in the 2012 edition of the iPhone.
  • It will be far more social: This is a confirmed upgrade. Tensions between Apple and Facebook prevented wide-scale integration between the two, but the next iPhone will tie into Twitter in new ways. However, it's not all bad blood between Facebook and Apple; there's also a good chance the company will finally unveil its iPad-specific app on Tuesday.

That's it for our three areas Apple investors must watch. You can stay updated on all of the Fool's iPhone 5 coverage in two ways this week.

First, add Apple to our free My Watchlist service. It'll deliver all of the Fool’s best up-to-date news and analysis in one central place.

  • Add Apple to My Watchlist.

Second, set a reminder to come back to Fool.com at 1 Eastern/10 Pacific next Tuesday to get all the best information on how the announcement will affect Apple investors.

Eric Bleeker owns shares of no companies listed above. You can follow Eric on Twitter to see all of his technology and market commentary. The Motley Fool owns shares of Apple, China Mobile, and Google. Motley Fool newsletter services have recommended buying shares of Apple, AT&T, NXP Semiconductors, China Mobile, and Google, as well as creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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