Apple Preps iPhones to Deliver to China Mobile


Quoting people familiar with the matter, The Wall Street Journal last Friday reported that Apple (NASDAQ: AAPL  )  is preparing to ship iPhones to China Mobile  (NYSE: CHL  ) . After years of negotiations, a deal with the world's largest wireless carrier is excellent news for Apple shareholders.

Just how big is China Mobile? Seven hundred forty-five million wireless subscribers, more than twice the population of the U.S., seven times Verizon Wireless' subscribers, and 17 times T-Mobile's subscribers.

The long-awaited deal
It's been about seven years since Apple launched the first iPhone and the world's largest carrier still lacks iProducts. For years, speculation of a deal has been just that: speculation, and no more.

Apple already has deals with China Telecom and China Unicom to sell the iPhone. Though these carriers boast some impressive numbers, together they are still just half the size of China Mobile.

Last Tuesday, when Apple announced it is hosting a satellite Apple event in Beijing on Wednesday September 11, there was wide speculation that a deal between China Mobile and Apple may be announced at the event. Now, given the Journal's report and a similar one from Bloomberg on the same day, it looks like the deal is finally here. Though it's still uncertain whether the deal will be announced at the Beijing event, we do know that it will not be announced at Apple's media event tomorrow, according to Bloomberg.

The takeaway for investors
For the last eight months that China Mobile has posted subscriber numbers (up until July), its sequential growth rates in 3G subscribers have outpaced its peers. Even more, only 20% of China Mobile's 745 million wireless subscribers are 3G subscribers, compared to 39% and 51% for China Unicom and China Telecom, respectively. This means that not only is China Mobile's 3G base growing faster than its peers', but it has more room to grow -- together, these two facets of China Mobile's subscriber base provide significant opportunity for Apple.

Rendering of Apple's rumored lower-cost iPhone. Source: MacRumors.

Morgan Stanley's Katy Huberty, after crunching some numbers, concluded that a cheaper iPhone combined with a China Mobile deal could triple Apple's addressable smartphone market in the country. China mobile is undoubtedly a catalyst for Apple's iPhone segment. I've detailed the opportunity here, here, and here.

With iPhones accounting for more than half of Apple's revenue, China Mobile could help Cupertino's tech king to finally move the needle in the right direction on its bottom line.

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