After almost six years of intense negotiations, Apple Inc. (NASDAQ:AAPL) finally signed the much-awaited deal with China Mobile Ltd. (NYSE:CHL) (HKG:0941) on Sunday. It will give the Cupertino-based company a much-needed boost. The world’s largest telecom operator has more than 763 million subscribers, and 176 million of them use 3G services.
Apple fans won’t be disappointed
Before China Mobile Ltd. (NYSE:CHL) (HKG:0941) was awarded 4G licenses earlier this month, a big hurdle to their deal was China Mobile Ltd. (NYSE:CHL) (HKG:0941)’s proprietary 3G TD-SCDMA technology. No other carrier has adopted the TD-SCDMA technology; even iPhones didn’t support the technology. The 35 million iPhone users on China Mobile Ltd. (NYSE:CHL) (HKG:0941) had to be content with 2G speeds.
Now that China Mobile Ltd. (NYSE:CHL) (HKG:0941) has won 4G TD-LTE licenses and signed a deal with Apple Inc. (NASDAQ:AAPL), a big question has been whether iPhones will support 4G only or 4G and 3G TD-SCDMA both. China Mobile Ltd. (NYSE:CHL) (HKG:0941) will roll out 4G to 16 cities by the end of 2013, and take it to 340 cities by the end of the next year. The companies said in a joint statement that the iPhones will work on 4G as well as 3G networks.
Apple has already thought about it
So, is Apple Inc. (NASDAQ:AAPL) going to design a new version of the iPhone 5S and 5C that can support China Mobile Ltd. (NYSE:CHL) (HKG:0941)’s unique TD-SCDMA technology? According to Tim Worstall of Forbes, Apple Inc. (NASDAQ:AAPL) has already designed a version of both devices that support TD-SCDMA. The iPhone 5C model A1516 and iPhone 5S model A1518 support TD-LTE as well as China Mobile Ltd. (NYSE:CHL) (HKG:0941)’s TD-SCDMA. The Cupertino-based company doesn’t list these models on its website, but they both have been granted access licenses from China Mobile Ltd. (NYSE:CHL) (HKG:0941).
Piper Jaffray analyst Gene Munster expects China Mobile Ltd. (NYSE:CHL) (HKG:0941) to sell at least 15 million new iPhones in 2014. One major issue with iPhones has been the grey market. People purchase iDevices outside China and bring them inside the country to sell at lower than the official prices. That happens for two reasons. One, if Apple Inc. (NASDAQ:AAPL) releases its devices in other countries much ahead of their launch in China it causes a spike in demand. Two, heavy import taxes levied by the Chinese government on imports make grey markets a more attractive option. But the grey market activity will be minimal in this case because TD-SCDMA technology is unique to China Mobile Ltd. (NYSE:CHL) (HKG:0941). No other carrier in the world uses it.
Apple Inc. (NASDAQ:AAPL) shares surged 3.64% in pre-market trading Monday to $569.
