Apple-China Mobile Deal To Boost Seasonally Dull March Quarter Sales

Apple Inc. (NASDAQ:AAPL)’s recent deal with China Mobile Ltd. (NYSE:CHL) (HKG:0941) will give the tech giant access to 763 million subscribers, more than twice the U.S. population. The world’s biggest wireless carrier will start taking pre-orders on December 25, and bring iPhones to its subscribers on January 17. The release date ensures that the iPhone sales remain strong in the historically dull March quarter. That’s why Susquehanna Financial Group analyst Chris Caso says that Apple Inc. (NASDAQ:AAPL)’s deal with China Mobile Ltd. (NYSE:CHL) (HKG:0941) is a solid near term catalyst to the stock.

Apple to produce 3 million iPhones for China Mobile in Q1

Though Apple Inc. (NASDAQ:AAPL) hasn’t revealed pricing and subsidy details yet, the pre-order site of China Mobile Ltd. (NYSE:CHL) (HKG:0941) says that customers have to sign up for a 4G plan. Interestingly, Apple Inc. (NASDAQ:AAPL)’s iPhones didn’t support China Mobile Ltd. (NYSE:CHL) (HKG:0941)’s proprietary 3G TD-SCDMA services. But now, the Cupertino-based tech giant will be making iPhones that are going to support both 3G and 4G on China Mobile.

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Supply chain sources told Chris Caso that Apple Inc. (NASDAQ:AAPL) will be producing 3 million iPhones for China Mobile Ltd. (NYSE:CHL) (HKG:0941) in the first quarter of 2014. Another one million units will be produced by the end of this year itself. Susquehanna Financial Group estimates Apple Inc. (NASDAQ:AAPL) to sell 10-15 million iPhones on China Mobile Ltd. (NYSE:CHL) (HKG:0941) through 2014. That will give Apple Inc. (NASDAQ:AAPL) about 10% share on China Mobile’s smartphone sales at the current run rate.

Current iPhone users may also upgrade to new Apple devices

China Mobile Ltd. (NYSE:CHL) (HKG:0941) already has more than 35 million iPhone users. But those subscribers can use only 2G technology because those iPhones don’t support the Chinese carrier’s unique 3G technology. Now that Apple Inc. (NASDAQ:AAPL) is going to supply iPhones that support 3G as well as 4G on the carrier, many of its current users may upgrade. China Mobile Ltd. (NYSE:CHL) (HKG:0941) recently said that it plans to sell 190-220 million smartphones next year, and at least 100 million of them will be 4G devices. That goal is pretty aggressive, but it shows how committed China Mobile Ltd. (NYSE:CHL) (HKG:0941) is to its 4G network.

Susquehanna Financial Group has a Positive rating on the stock with $650 price target. Apple Inc. (NASDAQ:AAPL) shares sank 0.32% to $568.29 at 10:29 AM EST.