Munster Gives His Two Cents on China Mobile-Apple Deal


Analyst Gene Munster from Piper Jaffray is optimistic that Apple (NASDAQ:AAPL) will reach a deal with China Mobile (NYSE:CHL) sooner rather than later. He has estimated that a deal with China’s largest wireless carrier would add 5 percent to Apple’s revenue in 2014.

Munster said in his latest report, seen by Wall St. Cheat Sheet, “We believe that Apple could sell 17 million total iPhones on China mobile in the 2014, which should add 5% to Street revenue estimates.”

This estimate comes after reports about a website where customers could preorder an iPhone 5S or 5C through a China Mobile affiliate located in the city of Suzhou went live on Monday night local time. The site was taken down by Tuesday night, and a China Mobile spokeswoman told reporters that China Mobile has not yet reached a deal with Apple, so the site could have been a hoax.

Munster said Piper Jaffray believes that Apple will make a deal with China Mobile by the March 2014 quarter. The 17 million figure estimate represents 2 percent of China Mobile’s subscriber base.

While the high price of Apple’s smartphones makes them inaccessible for many Chinese customers, who typically have to buy smartphones at full price, Munster notes that China Mobile’s unsubsidized devices are cheaper than those U.S. carrier Verizon Communications (NYSE:VZ) offers. The average unsubsidized smartphone cost on China Mobile is $270, compared to $449 at Verizon. The iPhone 5C costs $718 and the 5S costs $846 through Verizon, but Munster believes China Mobile may be able to offer lower prices.

Munster also predicted that Apple will release a larger screen next-generation iPhone in fall 2014. When that device is released, it will drive down the cost of the iPhone 5C even further, making that device more accessible to a wider range of consumers in China.

“In terms of the mechanics of the 17 million units, it is likely that there would be a proportionately larger chunk of devices sold in the first month or two of the device’s availability. We also note that if Apple updates the iPhone in the fall, China Mobile would likely get both the new device in addition to the typical pricing changes to existing devices, which could put the iPhone 5C at a more attractive mid-end price,” Munster wrote.

Rumors about a potential deal between Apple and China Mobile have been kicking into high gear recently. Last week, China’s official Xinhua news service reported that China Mobile will be the first carrier to offer 4G mobile services when the country launches its commercial 4G mobile communications network on December 18.

That has led some to speculate that a deal could be announced as soon as this month, but Munster is more cautious at putting the date sometime this spring.

Follow Jacqueline on Twitter @Jacqui_WSCS

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