Has Apple Already Missed the Boat With China Mobile?

For Apple  (NASDAQ: AAPL  ) , the elephant in the room has always been China Mobile (NYSE: CHL  ) . This has been a prominent storyline that investors have been closely watching for years, waiting for the day that the iPhone maker inks an official partnership with the largest wireless carrier in the world.

With over 726 million subscribers at the end of March, of which 114 million are 3G customers, China Mobile remains a significant iPhone catalyst that's always on the horizon. However, there's one big challenge that Apple will face, even after it inevitably launches on China Mobile's unique network: Has Apple already missed the boat with China Mobile?

Not-so-clear sailing
If investors look at how iPhone sales have fared historically in the U.S., there's evidence that suggests that timing does matter. The longer that it takes for a carrier to launch the iPhone, the less of a hold Apple is able to maintain on total smartphone sales. The implication is that absent the iPhone, competing platforms have more time to establish an installed user base, which makes it more challenging for the iPhone to gain traction.

Consider the iPhone's composition of total smartphone sales among the top three domestic carriers: AT&T (NYSE: T  ) , Verizon (NYSE: VZ  ) , and Sprint (NYSE: S  ) .

Carrier

Launched iPhone

iPhone % of Smartphones (MRQ)

AT&T

June 2007

80%

Verizon

February 2011

56%

Sprint

October 2011

30%

Sources: SEC filings and conference calls. MRQ = most recent quarter.

That being said, the iPhone is still able to gain share within a carrier's activations (the iPhone was just 55% of AT&T smartphone activations in Q4 2010), but it's easier when trying to gain a foothold with first-time buyers as opposed to users entrenched in a rival platform. The 30% figure at Sprint last quarter is evidence of that.

The iPhone is available on both of the smaller Chinese carriers, China Unicom and China Telecom. China Unicom got the iPhone way back in October 2009, with China Telecom coming onboard in March 2012, but neither carrier regularly discloses specific smartphone data. There's also a very active gray market for iPhones in China, which would render carrier-provided statistics less meaningful anyway. Still, the lack of an iPhone on China Mobile thus far may have given rival platforms an opening to swoop in an establish a fort.

The Chinese smartphone market and U.S. smartphone market are very different, and what's playing out stateside may not translate to the Middle Kingdom. Tim Cook noted that China does have an "unusually large number of potential first-time smartphone buyers," and the Chinese market is so enormous (over 1.1 billion mobile subscribers) that there should still be plenty of fish in the sea.

The sooner Apple hooks up with China Mobile, the better shot it has of capturing first-time buyers.

There's no doubt that Apple is at the center of technology's largest revolution ever, and that longtime shareholders have been handsomely rewarded with over 1,000% gains. However, there is a debate raging as to whether Apple remains a buy. The Motley Fool's senior technology analyst and managing bureau chief, Eric Bleeker, is prepared to fill you in on reasons to buy and reasons to sell Apple, and what opportunities are left for the company (and your portfolio) going forward. To get instant access to his latest thinking on Apple, simply click here now.


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  • Report this Comment On April 25, 2013, at 12:37 AM, makelvin wrote:

    One thing to keep in mind about China Mobile. Even though it is the largest wireless carrier in the world, it's smartphone 3G and/or LTE subscriber base is actually smaller than its smaller rival in the country. Most of their subscribers are currently just using basic feature phones on their network. Which means if Apple is to get on soon, they will potential be facing an enormous number of first time smartphone buyers. So to answer your question if Apple might have missed the boat with China Mobile, the answer is not at all.

  • Report this Comment On April 25, 2013, at 1:06 AM, verces wrote:

    After losing 40% of its value in less than a year, no dividends that can compensate it at all. iPhone is a best highend phone in the market last year but now with BBRY BB10 presence and no SJ to help topple or match it up - whoelse do you think is the best investment for this year round. I would split my portfolio and park some to BBRY and lets see who will be rewarded. Gone is the old management of BBRY so it is worthy to look at this company performance for the last 12 months. I'm a fanboy and now back to BB or BB10

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