Apple Inc. (NASDAQ:AAPL) would be wise to launch a low priced iPhone and team up with China Mobile to expand in the world’s largest country by population says a new report from Topeka’s Brian White. White cites strong growth numbers from China Mobile and notes that Apple Inc. (NASDAQ:AAPL) would be wise to build a close relationship with the firm.
China’s Wireless Subs Grow 13% YoY to 1.15 Billion in March
China Telecom Corporation Limited (HKG:0728) (NYSE:CHA), China Mobile Ltd. (NYSE:CHL) (HKG:0941) and China Unicom have all reported mobile subscribers for the month of March. During March, total subscribers in China (i.e., wireless, wire-line and broadband) rose to 1.55 billion, up 0.9% MoM (up 14.05 million), while wireless subscribers rose by 1.2%, up 13.24 million to 1.15 billion versus 1.13 billion in February.
A Lower Priced iPhone and China Mobile to Open Up New Opportunities
As Topeka indicated in a note on Apple Inc. (NASDAQ:AAPL) earlier this week this week, they believe the stock needs to complete the third phase (i.e., final phase) for a sustainable recovery in the stock price. After completing phase 1 (i.e., returning more cash to shareholders) and likely to complete phase 2 soon (i.e., bottoming in the profit cycle), the third phase requires the Company to tap into new growth opportunities and White believes the release of a lower priced iPhone this fall will meet this objective by expanding the Company’s market share in developing countries such as China, while at the same time providing Apple Inc. (NASDAQ:AAPL) with a more appealing iPhone portfolio to ink a deal with China Mobile Ltd. (NYSE:CHL) (HKG:0941) in 2014. Topeka considers both a lower priced Apple Inc. (NASDAQ:AAPL) iPhone and an agreement with China Mobile as tapping Apple Inc. (NASDAQ:AAPL) into new growth opportunities.
3G Subs in China Rise 84% YoY and Reach 280 Million in March
uring the month of March, 3G subscribers at the three carriers in China reached 280.0 million, up 6.6% MoM (up 17.41 million MoM) and the fastest MoM growth rate since December 2011. This represents YoY growth of 84% from the 152.0 million 3G subscribers in March 2012. As such, 3G subscribers now represent 24.5% of China’s wireless subscribers and well above the 15.0% from a year ago. By the end of 2013, Topeka is projecting 325 million to 350 million 3G subscribers in China; however, some of Topeka’s contacts in China believe 400 million is possible.
China Mobile Delivers Big 3G Growth in March, Reaching 114 Million 3G Subs
China Mobile’s total wireless subscribers came in at 726.3 million in March, up 5.88 million MoM (up 0.8%). China Mobile Ltd. (NYSE:CHL) (HKG:0941)’s 3G subscribers (TD-SCDMA) reached 114.4 million at the end of March, up a very strong 9.88 million MoM (up 9.5%) from 104.5 million in February. This was the second fastest (the fastest being February 2013) MoM growth rate in 3G subscribers for China Mobile since March 2011. China Mobile represents 63% of the total wireless subscribers in China but only 41% of the 3G users and up from 39% a year ago.
China Mobile is the only major carrier in China that does not have a relationship with Apple to sell the iPhone; however, Brian White expects this to change in 2014 and he believes the introduction of a more affordable iPhone by Apple Inc. (NASDAQ:AAPL) this year will be helpful with the carrier next year.
China Telecom and China Unicom Combined 3G Subs Grow 80% in March
China Mobile delivered the fastest MoM growth in 3G subscribers in March, increasing by 9.5%, followed by China Unicom Limited (NYSE:CHU) (HKG:0762) at 5.2% and China Telecom Corporation Limited (HKG:0728) (NYSE:CHA) at 4.3%. Over the past year, 3G subscribers at China Telecom and China Unicom Limited (NYSE:CHU) (HKG:0762) in aggregate grew by 80% to 165.9 million versus 92% growth for China Mobile to 114.4 million. China Telecom and China Unicom Limited (NYSE:CHU) (HKG:0762) are the only carriers in China that offer the iPhone. China Unicom reported 87.8 million 3G subscribers (WCDMA) in March, up 4.33 million MoM (up 5.2%) from 83.5 million users in February. Total wireless subscribers came in at 250.7 million, up 4.59 million MoM (up 1.9%), while total subscribers increased by 4.85 million subscribers MoM (up 1.2%) to 402.9 million users.
By comparison, China Telecom Corporation Limited (HKG:0728) (NYSE:CHA)’s 3G subscribers (CDMA 2000) grew by 3.2 million MoM (up 4.3%) to 78.1 million in March. Total wireless subscribers reached 168.0 million users, up 2.77 million MoM (up 1.7%) and total subscribers grew by 3.32 million users to 422.9 million MoM (up 0.8%).
Will Apple Inc. (NASDAQ:AAPL) seize the opportunity?