updated 12:35 am EST, Tue December 17, 2013
Numbers considered conservative, could go as high as 23 million
A new survey of Chinese consumers -- including those not yet on smartphones but planning to move to them -- predicts that a China Mobile deal that appears to be happening in spite of a lack of official announcements could result in an additional 12 million to 23 million iPhones sold in the first year. Though Apple already sells iPhones in China (including the latest models), the unveiling of a national LTE network for China and a deal with its largest carrier promises to boost the company's fortunes substantially.
Tim Cook meets with China Mobile officials
The survey, compiled by research groups within AlphaWise and Morgan Stanley, concluded that Apple should have no problem selling at least 12 million units to China Mobile subscribers in calendar 2014. Despite the fact that current iPhone users in China get sub-3G data speeds because older iPhones aren't compatible with the TD-HSPA variant used in China, there are already many more than 15 million iPhone users on China Mobile (having acquired their iPhones in Hong Kong and other countries), and millions more on each of the other two Chinese carriers, China Unicom and China Telecom.
The same survey called the 12 million figure a "base case," as it represents less than 10 percent of China Mobile's 178 million existing 3G smartphone subscribers. The company has a total subscriber base of nearly 760 million users, making it the largest telecom provider in the world. In addition to its large existing smartphone base -- some portion of which is likely to switch to the iPhone now that it is compatible with China's emerging TD-LTE network -- a growing number of feature-phone users are beginning to make the switch to smartphones, representing a longer-term growth opportunity.
Morgan Stanley analyst Katy Huberty believes that the upper range of potential first-year iPhone pickups from a deal with China Mobile could reach 23 million, based on data in the survey that suggested up to 279 million of China Mobile's customers might change to the iPhone. Many respondents to the survey said they were not planning to buy a smartphone in the next year, unless it was an Apple iPhone -- another bit of good news for the company.
Huberty believes the "base case" would add around $2.40 per share to Apple's earnings, up to around $5 a share in the more optimistic scenario. She also mentioned a less-likely "worst case" scenario of around five million units sold in the first year, envisioning a scenario where poll respondents who indicated interest in the iPhone were later persuaded to buy a different brand -- currently, China's cellphone market is dominated by Samsung, since it makes both smartphones and feature phones. Other analysts have predicted first-year China Mobile sales being around 17 million, or about 10 percent of the existing smartphone base for the carrier.