China boasts more than 1.3 billion people, many of whom live without high-end smartphones, tablets, and stable high-speed mobile computing connections like 4G -- In other words, "the necessities" to many of us. All those people, and the opportunity that upgraded infrastructure represents, explains why investors applauded the news that Nokia (NOK +0.19%) has partnered with China Mobile (CHL +0.00%), the largest mobile carrier in the world by total subscribers.
For the same reasons, Apple (AAPL +2.65%) fans cheered CEO Tim Cook's most recent trip to meet with China Mobile executives, in an effort to expand Apple's existing relationships in the market. Thanks to China Mobile, what was already a growth market for mobile device makers is getting even better.
What's the big deal?
China boasts a large population that high-end smartphone manufacturers have just begun to reach, making the country a particularly appealing market for Nokia and Apple, among others. Considering its population, the 260 million mobile phones sold in China in 2012 seem paltry. Of the total number of phones sold in China last year, about half were smartphones.
So, where does China Mobile fit into Asia's mobile computing market picture? As measured by subscribers, China Mobile – with more than 700 million customers – is the largest wireless carrier in the world . But of all those China Mobile customers, nearly 11% of them connect their mobile devices via its 3G wireless network. Thankfully for mobile manufacturers, that standard is quickly becoming passé.
Apple is already partnered with China Unicom and China Telecom, the next two biggest wireless carriers in the market. Problem is, the two carriers combined have barely half the number of subscribers that China Mobile has. That explains Cook's trips to the land of the rising sun: Growth in China requires a deal with China Mobile, plain and simple.
China Mobile leading shift to 4G
Though many Chinese are tuned into mobile computing, faster 4G connections haven't been an option for customers. That's about to change. According to a report issued by research firm IHS, by 2017, there will be 440 million mobile computing users connected in China via a 4G network. For China Mobile, its early commitment to building infrastructure has given it a huge head start in shifting to 4G.
As per IHS, China Mobile is expected to capture more than half of those 440 million 4G customers by 2017, again dwarfing the competition. For Nokia and Apple, let alone Chinese market-leading Google (GOOG +1.71%) and its Android OS, China Mobile's commitment to 4G should have their respective management teams salivating. Can anyone say upgrade?
Nokia, Apple, and China Mobile
Last year was the year of the Android OS phone in China, at least by market share. With so many mobile computing alternatives available with Android, research firm Informa Telecoms & Media estimates it was the OS of choice for two-thirds of the phones sold in China in 2012. China Mobil's leadership position in the shift to 4G isn't going to change the inroads that Android devices have made overnight, but it opens the door for both Nokia and Apple to make significant strides.
Nokia's certainly gotten a jump-start on Apple, at least in terms of its relationship with China Mobile. The agreement to offer Nokia's made-for-the-Chinese market Lumia 920T was a coup, and Cook is trying to make a similar deal happen for Apple. What sets Nokia apart was China Mobile's decision to subsidize the Lumia 920T with a two-year contract. Instead of asking customers to pony up nearly $740 for a new Lumia 920T -- the initial unsubsidized cost -- now, a single Yuan (about $0.16) will do the trick.
Apple already runs several retail stores in China, alongside its aforementioned agreements with non-China Mobile carriers. According to Cook, Apple should continue to see growth in the region, with China becoming Apple's "...largest market in the near future." To make that happen, China Mobile will need to be part of the equation, which makes Cook's trips overseas so important. Unfortunately, Apple and China Mobile have had these conversations before, but the Chinese unique 3G network has been a roadblock.
Should Apple wait, now that China Mobile is building out its 4G infrastructure, and saturate the market with 4G-ready iPhone 5s? Let's hope not, for the sake of Apple shareholders.
Waiting for China's 4G wireless infrastructure poses two problems for Apple: Nokia, and Google's Android. Timing is crucial as China shifts to cutting-edge technologies, and Android's current OS dominance, along with Nokia's inroads with China Mobile, put them ahead of Apple. Bottom line: The exploding Chinese market isn't going to wait for Apple. Nor will Nokia, Google, Samsung, and all the others.
