Apple Inc. (AAPL) Potential From China Mobile’s Latest Results

Apple Inc. (AAPL) Potential From China Mobile’s Latest Results
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Apple Inc. (NASDAQ:AAPL) is running out of time in the year to announce a deal with China Mobile Ltd. (NYSE:CHL) (HKG:941), the world’s largest mobile carrier. Time and again, analysts from multiple firms have highlighted just how important a deal with the carrier would be for Apple. Stifel analysts have examined China Mobile’s latest results to gauge the opportunity Apple has if it makes a deal with the company.

Apple Inc. (AAPL) Potential From China Mobile’s Latest Results

China Mobile’s Q3 adds were strong

China Mobile Ltd. (NYSE:CHL) (HKG:941) released its latest results this morning, completing the triad of China’s top three carriers. China Mobile is the only one of the three which doesn’t currently carry Apple Inc. (NASDAQ:AAPL)’s iPhone. Both new models have been available on China Unicom and China Telecom since their launch on Sept. 20.

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During the third quarter China saw overall mobile subscribers hit 1.209 billion, with 3G subscribers at 377.5 million or a 31% penetration. China Mobile had 755.2 million total subscribers at the end of September, an increase from 750.4 million at the end of August and 710 million at the end of 2012. The carrier had 169.5 million 3G subscribers, which is about 22% of its total installed base and almost 45% of China’s total 3G subscriber base.

China Mobile continues to hold a commanding lead over China Unicom, which had 272.8 million subscribers at the end of September, and China Telecom, which had 181.1 million subscribers.

Apple’s potential at China Mobile

Stifel analyst Aaron C. Rakers and the rest of his team said they still believe Apple Inc. (NASDAQ:AAPL) will announce a deal with China Mobile soon. They estimate that the addition of China’s largest carrier will add up to $4 to $8 earnings per share in annualized earnings over the 12 months after launch using a 40% gross margin estimate. When Apple Inc. (NASDAQ:AAPL) releases its results tonight, investors and analysts will be checking to see how the company is doing in mainland China where it struggled in the June quarter.

When considering Apple’s potential at China Mobile, Rakers and his team gauged the carrier’s relative 3G success, highlighting how the carrier caught 61% of September’s total 3G subscribers. They say this is a continuation of the high net adds we saw in previous months. So far this year, China Mobile Ltd. (NYSE:CHL) (HKG:941) has captured about 57% of the 3G subscriber additions among China’s top three carriers.

Apple and China’s big three carriers

The analysts also note that China Mobile’s results showed that profitability fell because of the build-out of its TD-LTE networks. Apple Inc. (NASDAQ:AAPL)’s two new iPhones support the technology, which is why so many have been expecting a deal between the two companies soon. Also the company posted a job listing for an expert in China Mobile’s technology, so it would seem like a deal might be soon.

Stifel analysts continue to rate Apple as a Buy with a $540 per share price target.

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