Apple Inc. (AAPL), China Mobile Deal: Dec 18 Has Come And Gone

Apple Inc. (AAPL), China Mobile Deal: Dec 18 Has Come And Gone
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BMO Capital Markets analysts Keith Bachman, Jung Pak and Gaurav Gupta maintains their Outperform rating for Apple Inc. (NASDAQ:AAPL).

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Apple-China Mobile deal a no go?

December 18 has come and gone, and China Mobile Ltd. (ADR) (NYSE:CHL) (HKG:0941) did not announce a deal with Apple Inc. (NASDAQ:AAPL), as many Asian press reports had predicated.

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At a news conference this morning, the chairman of China Mobile Ltd. (ADR) (NYSE:CHL) (HKG:0941) did say the company plans to add ~100 million TD LTE handsets in CY2014, and deploy 500k LTE bay stations by the end of CY15, compared with 200k target by the end of CY13. China Mobile has about 176 million 3G subs (as of October) and has added about 88 million 3G subs so far this year. Analysts at BMO Capital have previously stated that they think the 200k bay station target by the end of CY13 is ambitious.

While analysts at the firm don’t know if terms have been agreed to by Apple Inc. (NASDAQ:AAPL) and China Mobile Ltd. (ADR) (NYSE:CHL) (HKG:0941), historically Apple Inc. (NASDAQ:AAPL) has not wanted to be a part of any broad announcements. Apple Inc. (NASDAQ:AAPL) likes the spotlight. Since Apple Inc. (NASDAQ:AAPL) has a phone that has been approved and qualified, they still think a joint announcement will be forthcoming.

Apple iPhone numbers on China Mobile network

In BMO’s analysts recent meeting with China Mobile Ltd. (ADR) (NYSE:CHL) (HKG:0941), management commented that as many as 50 million iPhones were on the China Mobile network, including strong demand in CY4Q13.

Analysts continue to believe that China Mobile could add around 15 million iPhones in CY14. They note that in their recent meetings with all three Chinese carriers this month, they indicated that the high end of the smartphone market (4,000 RMB and above) would be around 15% of total 3G units in CY14.

Although analysts think iPad units/ASPs are tracking well for both the December and March quarters, they think sell-side expectations are likely not including enough seasonality for iPhones in the March quarter, consistent with firm’s previous notes. The later a potential deal with China Mobile Ltd. (ADR) (NYSE:CHL) (HKG:0941) is announced, the better for Apple Inc. (NASDAQ:AAPL)’s March quarter, for sell in. Analysts continue to believe that both China Mobile and Apple Inc. (NASDAQ:AAPL) will want phones available for Chinese New Year (January 31).

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