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The countdown continues to tick toward the inevitable partnership between Apple (Nasdaq: AAPL ) and China Mobile (NYSE: CHL ) . Have no doubt about it -- this announcement will happen. The only uncertainty is when.
My educated guess? Later this year.
The pieces of the puzzle
There are a lot of moving parts that all need to fall into place before China Mobile gets its hands on the iPhone. The main obstacle so far has been technological limitations related to its 3G network, similar to why T-Mobile has never gotten it officially, regardless of how badly it wants it.
Adventurous users who have unlocked their devices are able to use them on both China Mobile's and T-Mobile's networks, but the data performance is relegated to slower 2G speeds. That hasn't stopped China Mobile from already garnering more than 15 million iPhone users who are willing to live with the slower connection.
Of course, the big difference is that T-Mobile is the smallest major carrier in the U.S., while China Mobile is the largest wireless carrier in the world. At the end of March, it boasted 667.2 million subscribers, of which only 59.2 million were using 3G data. China Mobile is in the process of building its unique TD-LTE network, a slightly different variant than the 4G LTE we see here domestically.
China Mobile is hoping Apple will engineer its next iPhone to be compatible with its network, and last September, China Mobile Chairman Wang Jianzhou said the company had "already got a positive answer from Apple." The iPhone 4S was launched the following month and obviously didn't include compatibility with any flavor of LTE.
Wang has since retired, and the company redesignated Xi Guohua as chairman. "We've been actively talking to Apple on how we can cooperate," Xi said at a recent shareholder meeting, according to Reuters. "I can't give you too many details, but I'd like to repeat that both sides do hope to boost our cooperation."
Xi also said that China Mobile is interested in becoming a "global company" and is interested in expanding into Hong Kong and the United States. It's been seeking regulatory approvals, but in the meantime it continues to expand its testing of its TD-LTE network, with the next phase of testing expected to be completed by June of next year.
In February, mobile-chip giant Qualcomm (Nasdaq: QCOM ) announced the next generation of baseband chips that are almost assuredly bound for the next iPhone, as Apple has recently switched to Qualcomm as the exclusive supplier of baseband modems. You'll notice that TD-LTE is among the supported technologies, along with just about every other wireless standard on Earth.
Assuming that these chips are in the next iPhone, there would no longer be any technical obstacles for China Mobile to get the iPhone. Of course, Qualcomm has been having some supply constraints related to 28-nanometer production at Taiwan Semiconductor Manufacturing (NYSE: TSM ) , which could threaten to hold back Apple indirectly.
When asked about these constraints on the most recent conference call, Apple CEO Tim Cook said:
Obviously, we're aware of the lithography transition issue that you mentioned with 28-nanometer. We currently do not use 28-nanometer parts. But as you also know, we don't comment about future products, and so I can't talk about the future part. Generally, outside of this, we work very closely with our supplier partners and do everything that we can do to get supply. And sometimes, we're successful with that, and sometimes we're not. And so you can bet that we are focused on anything that we think may impact us and trying to push every button within our disposal to work on it.
Source: Q2 2012 earnings conference call.
The next iPhone should be technically compatible with China Mobile's new network. Negotiations might take a few months, so I think early next year would be the latest to see the pair agree to a deal. After all, it took a few months before China Telecom (NYSE: CHA ) inked a deal in January, officially launching the iPhone 4S two months later.
The pieces are all lining up. It's just a matter of time now.
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