Apple Earnings: Does This New Data Point Suggest an iPhone Blowout?

Tomorrow, Apple (NASDAQ: AAPL  ) reports its latest earnings results, and expectations are riding high heading into the report. Street analysts continue to boost price targets and unit estimates. At last count, the consensus is around 36 million iPhone units last quarter. Investors now have a fresh data point that could suggest that Apple has an iPhone blowout in store for tomorrow.

Investors waited years for Apple to partner with China Mobile (NYSE: CHL  ) , and it's going to take some time to satisfy all that pent-up iPhone demand within the world's largest subscriber base. Launching the iPhone alongside China Mobile's brand new TD-LTE network will continue paying off for many quarters to come.

In March, China Mobile Chairman Xi Gouhua told The Wall Street Journal, "most of [the new 4G customers] are iPhone users." At the time, China Mobile had 1.3 million 4G customers. A month later, that figure had risen to 2.8 million, and CEO Li Yue confirmed that half of these were iPhone users.

China Mobile just posted a massive jump in 4G customers in June. The carrier now has nearly 14 million 4G customers, up from 8.1 million in May. If the iPhone continues to comprise about half of those customers, then there could be some upside to the iPhone figures that Apple is about to report.

Source: China Mobile.

China Mobile added 11.1 million 4G customers during the second quarter. Half of that would be 5.6 million iPhones. It's unclear if Apple can maintain 50% of new 4G customers though, and the data is limited at this point. Still, this partnership didn't exist a year ago, so all of the iPhones sold on China Mobile's network are incrementally positive for the inevitable year-over-year comparisons.

China Mobile customers have been jumping on the 4G bandwagon much faster than they did when 3G was introduced. 4G penetration of China Mobile's 790 million customers is already approaching 2%.

Source: China Mobile.

Much of the continued 4G ramp is attributable to China Mobile's ongoing 4G rollout. The company expects to have over 500,000 4G base stations up and running by the end of the year, which should translate into around 50 million 4G customers.

Earlier this month, China's three wireless carriers announced that they had established a joint infrastructure company to facilitate faster 4G rollouts. The companies would share various assets in order to reduce capital expenditures. Interestingly, this joint venture could help China Mobile's smaller rivals catch up and eliminate China Mobile's modest headstart. The joint venture wouldn't affect Apple's June quarter's results, but the Mac maker would benefit in the medium-term from faster 4G deployment among all carriers within the Middle Kingdom.

For tomorrow, let's just hope that China Mobile's spike in 4G additions bodes well for iPhone sales.

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Comments from our Foolish Readers

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  • Report this Comment On July 21, 2014, at 3:45 PM, twolf2919 wrote:

    Common! You have TWO data points: for the first data point, *most* 4G users were iPhone users and for the second, only *half* were iPhone users. By what leap of faith, would the third data point continue to point to *half* of all LTE users being iPhone users??? Just connect the dots!! -Isn't it obvious that the best guess for June should be that 1/4 of new LTE users would be iPhone users?

  • Report this Comment On July 21, 2014, at 3:52 PM, phoenixseangels wrote:

    most 51%, half 50%, newest 49%.

  • Report this Comment On July 21, 2014, at 4:33 PM, AceOfSaves wrote:

    Phoenix -1

    Wolf - 0

    Lol. Nice job phoenix.


    It took me a few minutes to figure out what you meant with the first word in your comment, "common". I was thinking, "what are the common things is this person referring to?" Then I realized that you meant to say "come on" or "c'mon".

  • Report this Comment On July 21, 2014, at 5:25 PM, melegross wrote:

    twolf2919, you didn't read it correctly. I just knew some people would do this.

    What the CEO said was that most of the NEW 4G customers were iPhone users, of the 1.3 million. Not most of the 1.3 million. There were users before the new iPhones that run on their network came out.

    He then said that half of the 2.8 million 4G users a month later were iPhone users.

    Those two numbers are both compatible.

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Evan Niu

Evan is a Senior Technology Specialist at The Motley Fool. He was previously a Senior Trading Specialist at a major discount broker. Evan graduated from the University of Texas at Austin, and is a CFA charterholder.

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