What the China Mobile Deal Means for Apple Investors
China Mobile finally took a bite out of Apple today, as the duo forged a long overdue agreement for China Mobile to offer iPhones on its network, according to The Wall Street Journal. This is a big win for Apple. China Mobile boasts 759 million subscribers, making it the world's largest mobile operator.
That's more than three times number of subscribers AT&T and Verizon have -- combined. A subscriber base of that size could deliver billions in added revenue for Apple. Let's take a closer look at what the arrangement means for the tech giant and its shareholders.
China goes high-speed
The deal comes after China's Ministry of Industry granted licenses to China Mobile and two other telecom companies to operate 4G wireless services in the country. This is particularly important for China Mobile because it should help the company attract more smartphone users. Up to this point, the company's unreliable 3G network has limited the number of subscribers that use smartphones with that service. In fact, only 176 million China Mobile's customers today have smartphones.
However, China Mobile has been aggressively investing to build out a new 4G network, spending as much as $7 billion this year on the rollout. With a speedier network in place, more China Mobile customers may be inclined to become smartphone owners. That obviously bodes well for Apple.
Gene Munster of Piper Jaffray says Apple could sell as many as 17 million iPhones in the world's most populous country during fiscal 2014. That would account for about 10% of China Mobile's total 3G customer base. Sales of the iPhone at China Mobile could start as early as this month, following the debut of China Mobile's branded 4G network on Dec. 18.
Analysts at RBC Capital Markets say this could translate into an additional $9 billion-$10 billion in annual revenue for Apple. RBC analyst Amit Daryanani sees the Apple-China Mobile deal translating into an added $3 in earnings per share for Apple shareholders, based on estimates of 17 million iPhone sales.
Despite being a clear win for the Cupertino giant, Apple's stock was only up about 1% at the time of this writing. It's likely that investors are waiting for Apple to confirm the deal before we see a market reaction to this news. But there's no denying it: This deal is a major victory for Apple.
The article What the China Mobile Deal Means for Apple Investors originally appeared on Fool.com.Fool contributor Tamara Rutter owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and China Mobile. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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