Apple Inc. May Sell 20-25 Million iPhones On China Mobile

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Preorders for Apple Inc. (NASDAQ:AAPL)’s iPhones are set to begin tomorrow on China Mobile’s website, and analysts are making estimates about just how many subscribers could switch to the iPhone. Baird analysts William V. Power, Steven J. Beckert and Andrew T. Flis are projecting that Apple could see an incremental 20 million to 25 million additional units in the 2014 calendar year, thanks to the deal with China Mobile Ltd. (NYSE:CHL) (HKG:941). Their estimate is in line with Cantor Fitzgerald’s estimate.

Apple’s benefits from China Mobile

As the world’s largest carrier, China Mobile represents a major opportunity for Apple Inc. (NASDAQ:AAPL). According to the Baird analysts, the company could see about 20 cents in earnings per share for every 1 million units it sells on the China Mobile network. As a result, they reiterated their Outperform rating and $620 per share price target on Apple.

In all, China Mobile Ltd. (NYSE:CHL) (HKG:941) has about 755.2 million wireless subscribers, which is significantly more than China Unicom’s 250.7 million and China Telecom’s 181.1 million subscribers. Analysts at multiple firms suggest that at least 30 million of China Mobile’s current subscribers have one of Apple’s older 2G models. Those users could well be ready for an upgrade to the newer models.

China Mobile expected to offer subsidy

The carrier is expected to subsidize Apple Inc. (NASDAQ:AAPL)’s iPhone 5S in a manner that’s similar to how China Telecom and China Unicom are doing it. Baird analysts believe this could reduce some investors’ worries about how much the handset costs up front.

They are estimating 166.5 million total iPhone shipments for the 2014 calendar year. That’s compared to the roughly 155.3 million iPhones for the current calendar year. However, they suggest that China Mobile could drive upside to their estimate.

Apple already guiding for China Mobile?

The analysts suspect that Apple Inc. (NASDAQ:AAPL)’s December quarter guidance already included contributions from China Mobile Ltd. (NYSE:CHL) (HKG:941), although once again there could be greater potential for upside next year.

The Baird analysts noted that Apple saw “significant” improvement in smartphone market share in Japan thanks to the addition of NTT DoCoMo, the nation’s biggest carrier. In the three months ending in October, the iPhone was 61% of all smartphone sales. In October alone, that share surged to 76%.

They also updated their checks on supply for the iPhone and iPad. Their daily store and inventory checks show that supply of most iPhone models appears to be solid, which will position the company for a solid holiday season. They also reported that supply of the iPad Air remains solid and that Apple Inc. (NASDAQ:AAPL) continues to improve supply for the iPad Mini with Retina display.

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