Analyst Brian White reveals October growth numbers from China's three biggest carriers and weighs in on what they mean for Apple Inc. (AAPL).
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Apple Inc. (NASDAQ:AAPL) is still expected to strike a deal with the world’s largest carrier. However, as the end of this year approaches rapidly, analysts are starting to admit that it might not happen this year. This week Chinese carriers released their October subscribership numbers, and those numbers suggest not only the size of Apple’s current opportunity in China, but also what the company can gain access to when it strikes a deal with China Mobile.
When will Apple announce a deal with China Mobile?
There were rumblings a few months ago that Apple Inc. NASDAQ:AAPL) and China Mobile Ltd. (NYSE:CHL) (HKG:941) had already finalized a deal, but one was never announced. Apple even posted a job listing for an engineering expert with experience in China Mobile technology. Cantor Fitzgerald analyst Brian J. White is one analyst who has been saying for most of this year that a deal with the carrier may not happen until 2014, and he continues to hold that belief.
However, he expects it by the end of the 2014 calendar year, which means he is allowing more time in his projection than analysts who are now looking for it by the Chinese New Year, which is the end of January.
Strong growth at Chinese carriers a positive for Apple
Total wireless subscribers in China rose to 1.22 billion last month. Total Internet subscribers (wireline, wireless and broadband) rose by 9.38 million—an almost 1% month over month increase and an 8% year over year increase—to 1.63 billion. Wireless subscribers increased by 9.45 million, an almost 1% month over month increase and 12% year over year increase.
October’s subscriber numbers for China’s three biggest carriers showed strong 3G growth during October. According to White, overall 3G subscribers there rose 84% year over year in October. He sees Apple Inc. (NASDAQ:AAPL) as one of the big “long-term winners” in the ramp-up of 3G mobile Internet in China.
China’s sequential 3G growth slows
The analyst notes that month over month growth in 3G subscribers in China slowed down to the lowest level on record. Subscribers increased by 13.4 million in October to 391 million, although this is a 3.5% sequential growth. That’s compared to the 4.9% growth recorded in September and is the lowest growth on record, going back to March 2009. Assuming a 3% growth in subscribers for this month and next month, China will end this year with about 415 million 3G subscribers. By the end of next year, White estimates that China’s 3G subscribers will top 600 million.
It’s no surprise that China Mobile Ltd. (NYSE:CHL) (HKG:941) led 3G growth last month even though both China Unicom’s and China Telecom’s 3G subscribership during October benefited from the launch of the two new iPhones. China Mobile’s 3G subscribership grew by 6.52 million or 3.8% sequentially. That’s compared to the carrier’s almost 7% growth in September, however. China Unicom was nipping at China Mobile’s heels percentage-wise, however, with a 3.4% growth in 3G subscribership. China Telecom wasn’t too far behind either, recording 3.2% growth in 3G subscribers.
China Mobile ended October with 759.3 million wireless subscribers, which is 62% of China’s total subscribers. This highlights just how big of an opportunity the carrier offers for Apple Inc. (NASDAQ:AAPL). China Mobile’s share did fall slightly though, from 64% a year ago.
Apple returns to growth in China
One of the big concerns investors had with Apple’s June quarter numbers was slumping sales in Greater China, which had previously been a strong region for the company. The company did return to growth there during the September quarter, however, reporting a 6% year over year growth. White sees some upcoming catalysts for Apple Inc. (NASDAQ:AAPL), namely, a bigger iPhone 6 with a five-inch screen next year. He expects the larger iPhone to begin “reaccelerating iPhone sales growth in Greater China.”
The analyst continues to rate Apple as a Buy with a $777 per share price target.
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