Apple Inc. (NASDAQ:AAPL) has finally signed a deal with China Mobile after months of speculation, reports the Wall Street Journal. The Cupertino-based company usually has an upper hand while negotiating a deal because no telecom carrier can afford not to have the iPhone on its offering. But this time, Apple Inc. (NASDAQ:AAPL) has found its match at the negotiating table. That's why the deal took so much time to consummate, says Cantor Fitzgerald analyst Brian J. White.
Apple finds its match on the negotiating table
With China Mobile, Mr. White believes that Apple Inc. (NASDAQ:AAPL) couldn't attach the special bells and whistles it demands with an iPhone agreement. In most deals, Apple Inc. (NASDAQ:AAPL) requires companies to buy specific quantities and favor iPhones over other devices. But China Mobile's size of about 760 million subscribers might have given the Chinese company enough power to come down hard at the negotiation table. On the other hand, Chinese consumers crave Apple Inc. (NASDAQ:AAPL)'s products, so China Mobile would clearly benefit from the deal as well.
According to Cantor Fitzgerald, the iPhone maker was waiting for the Chinese government to issue 4G licenses. China Mobile and its smaller rivals were awarded 4G licenses on Wednesday. Sources told the Wall Street Journal that China Mobile would start offering iPhones to its customers starting December 18. It will give Apple Inc. (NASDAQ:AAPL) access to a customer base that is seven times larger than that of Verizon Wireless.
Mr. White believes that a larger size iPhone will further provide growth opportunity for Apple. There are currently about 35 million to 40 million iPhone users on China Mobile's network. It gives Apple Inc. (NASDAQ:AAPL) dual opportunity of attracting new users as well as enticing current users to upgrade in 2014. Cantor Fitzgerald thinks that Apple Inc. (NASDAQ:AAPL) could sell 20 million to 24 million iPhones to China Mobile in 2014.
Upside potential for Apple this quarter
As for the current quarter, iPhones are likely to go for sale on China Mobile on Dec.18. It means there will be about two weeks before the current December quarter ends. But Apple Inc. (NASDAQ:AAPL) hasn't included the estimated revenues generated by this deal in its December quarter guidance, according to Apple Insider. So, Piper Jaffray analyst Gene Munster thinks it will have significant upside potential on the stock. Munster estimates Apple Inc. (NASDAQ:AAPL) to sell 17 million iPhones to China Mobile in 2014.
Apple Inc. (NASDAQ:AAPL) shares were down 0.25% to $566.50 in pre-market trading Friday. Cantor Fitzgerald has a Buy rating on the stock with $777 price target.