Is China Mobile Ready to Run to Apple?

The lack of partnership between Apple (NASDAQ:AAPL) and China Mobile (NYSE:CHL) may have hurt the former’s growth efforts in China, but it’s now time for the wireless provider to feel the need for the iPhone, Evercore Partners analyst Rob Cihra has said.

“Driving competitive dynamics, we think China Mobile could be starting to ‘need’ the iPhone more, since it has seen its 3G market share erode by 7 percent to 37 percent since 2011 vs. China Telecom (NYSE:CHA) + [China] Unicom (NYSE:CHU) having gained 7 percent to 63 percent,” Cihra wrote in a note to investors on Thursday, according to Barron’s. According to the analyst, China Unicom alone has added nearly 2 million more 3G subscribers than China Mobile despite being almost a third of the latter’s size.

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“With an estimate that the iPhone could achieve 20 percent penetration of China Mobile’s 3G/4G subscribers, we see it offering a higher than 16 million iPhone opportunity its first full year,” the analyst added.

In terms of overall iPhone performance, Cihra said a growing proportion of the demand for the device was now coming from replacement sales versus new buyers.

“Now five-and-a-half years since Apple launched its first iPhone in the second half of 2007, by definition a growing proportion of iPhone demand is driven by replacement sales vs. incremental new users,” he wrote. “Of the total fiscal year 2012 sell-through of 122 million iPhones, we estimate 32 percent coming from replacements/upgrades vs. 68 percent from new users.

“But looking into fiscal year 2013, we estimate replacement sales increasing to 49 percent of the mix of a total 143 million iPhone sell-through, and new user additions actually tailing off a negative 11 percent year-over-year at 74 million vs. 83 million in fiscal year 2012. We think this dynamic is driving the growing expectations for a lower-cost iPhone in hopes of broadened Apple’s addressable market, but to date we believe the company’s intentions are to keep addressing that lower end through older-generation models.”

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