Apple's China syndrome

The tech giant has long stated that the People's Republic is one of its most important markets, but it doesn't have an agreement with China Mobile yet. Could this change?

By TheStreet Staff Jan 4, 2013 1:55PM

Image, Man with laptop copyright Mike Kemp, Getty Images, Getty ImagesBy Chris Ciaccia  

 

Apple (AAPL) and CEO Tim Cook have made no bones about it: China is going to be one of Apple's most important markets in the coming years. However, the tech giant doesn't have an agreement with China Mobile (CHL) yet. 


Some on Wall Street think this is about to change sooner rather than later.

 

Evercore Partners analyst Rob Cihra said he believes China Mobile will eventually need to come to the table with Apple, as it's losing market share for the most important clients, ones who use data plans, or 3G customers.

 

"We think China Mobile could be starting to 'need' the iPhone more, since it has seen its 3G market share erode by -7% to 37% since 2011 vs. China Telecom+Unicom having gained +7% to 63%," Cihra wrote in his note.

 

Smaller telecoms like China Telecom (CHA) and China Unicom (CHU) have been benefiting at the expense of China Mobile, as these two carriers now have the iPhone 5, whereas China Mobile, with its more than 600 million subscribers, doesn't.

 

Kim Eng analyst Andy Poon noted that China Mobile lost 3G market share in November, only adding 3.1 million users, a decline of 16% month over month. China Unicom and China Telecom increased their market share, adding 3.3 million and 3.1 million users, respectively.

  

"We believe the surprising MoM decline in China Mobile's 3G net adds in November is due to the popularity of the CNY20 entry 3G plans with usage rebates offered by China Unicom and China Telecom," Poon wrote in his note.

 

If China Mobile continues to cede market share in the lucrative market of 3G, perhaps it will be forced to tango with Apple, which it has not done so as of yet.

 

Cihra estimated that China Mobile has 82 million 3G subscribers, not much more than China Unicom (73 million) and China Telecom (66 million). Where the stark difference lies with the three telecom providers is the percentage of 3G users, with China Unicom having 31% of its users using 3G speeds, and an astounding 42% for China Telecom. Just 12% of China Mobile users have access to 3G capabilities.

 

The iPhone 5 became available in China on Dec. 14, to exceptionally strong reaction, with Apple announcing it sold 2 million iPhone 5s in its first weekend in the country.

 

In the press release, Cook again reiterated how important China is to Apple. "China is a very important market for us and customers there cannot wait to get their hands on Apple products," Cook was quoted as saying.

 

On the most recent earnings call, Cook noted fourth-quarter Chinese revenue was up 26% year over year to $5.7 billion. The iPhone 5 had officially not been granted network access yet. Striking a deal with China Mobile will be an important part of growing that pie.

 

More from TheStreet.com

1Comment
Jan 4, 2013 2:09PM
avatar
Maybe this is why China Mobile signed an agreement to subsidize Nokia's Lumia 920 for $0 with a two year $60 month contract. Chinese can also get different higher purchase options for lower monthly subscription fees. This will set the bargaining mark for Apple's eventual China Mobile deal. Apple will get no more than Nokia's subsidy and that's why AT&T and Verizon as so interested in Nokia's success in the US.
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

114
114 rated 1
278
278 rated 2
474
474 rated 3
641
641 rated 4
639
639 rated 5
663
663 rated 6
640
640 rated 7
499
499 rated 8
284
284 rated 9
122
122 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
COPCONOCOPHILLIPS9
TAT&T Inc9
VZVERIZON COMMUNICATIONS9
KOGKODIAK OIL & GAS Corp9
CVXCHEVRON CORPORATION8
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.