Apple and China Mobile - iChina

Yesterday Wall Street Journal made an announcement about Apple which is probably the biggest Apple announcement since the iPhone 4 was released. If you know much about Apple, that was a huge announcement. The release titled Apple, China Mobile Sign Deal to Offer iPhone explains how the carrier could be selling iPhones as soon as 18th of December. China Mobile has a whopping 759 million subscribers. To put that into perspective, that is 3.8 times the size of MTN. Everything in China is just that much bigger, even bigger than Texas.


According to the WSJ Apple only has a 6% market share in China but estimates reckon that this deal will sell around 17 million iPhones. The company sold 33.8 million phones in the last quarter so that estimate will be very significant. I know there are concerns about the iPhone being too expensive for the Chinese market but I couldn't disagree more. The Apple brand is so strong I believe that the iPhone will become the ultimate aspirational product in China now that it is readily available. The cool factor of the iPhone will force people to eat only plain rice for a few months.


Let's also not forget that along with those 17 million extra phones sold, Apple will now have 17 million brand new entrants to the Apple platform. Music, Movies and Applications all make Apple a solid income. In fact if iTunes was separately listed it would be a very exciting company to invest in and would probably afford a higher multiple. I cannot explain how valuable it was having an iPhone on my travels. The apps helped me with translations, navigation and pictures while the music and reading features came in very handy on the long buses.


As always the market had already anticipated this deal with the stock up nearly 10% over the last two weeks. Trading at $567.90 we're still well off the highs of $700 reached in September last year but even if you bought at the very top I believe your decision will be justified over the next five years. If you picked up my rhetoric from what I said above about the Chinese consumer, I believe the market underestimates Apple's official entry into China. Because let's be honest, until you have cracked China Mobile you are just not quite there. They will sell more phones than expected and they will convert millions of people into Apple lovers. The knock on effects of that will be difficult to quantify. And that is not even considering the possibility of a new blockbuster product. Good things to come.