After months of tantalizing rumors that Apple and China Mobile Ltd. (NYSE ADR: CHL) were on the brink of an agreement to allow China's largest carrier to sell the iPhone, the companies finally confirmed the deal yesterday (Sunday).
It's a big new market for Apple's primary profit machine, so it should give Apple (Nasdaq: AAPL) stock a huge boost – right?
Well…sort of. But don't put in that order for a new yacht just yet…
China Mobile's Effect on AAPL
True, Wall Street is clearly pleased, with AAPL stock up more than 3% in midday trading Monday to about $567.
But the China Mobile deal by itself won't be enough to push Apple stock up hundreds of dollars. You see, the deal had been expected for months, so much of the benefit is already priced into AAPL shares.
Make no mistake, this is a critical development for Apple and the iPhone – China Mobile will start taking pre-orders Dec. 25, with full availability expected Jan. 17 – and it will contribute to a rising Apple stock price in 2014 and beyond.
China Mobile is the largest carrier in the world. Its 763 million subscribers are more than seven times that of the largest U.S. carrier, Verizon Communications Inc. (NYSE: VZ). For that matter, China Mobile's subscriber base is twice the size of the entire population of the United States.
And the opportunity for Apple is also big. As a relatively expensive product in a market dominated by customers of modest means, the iPhone has lost market share to smartphones based on Android, Google Inc.'s (Nasdaq: GOOG) free mobile operating system.
The iPhone accounts for about 5.8% of the Chinese smartphone market, down from 10% in the second quarter of 2012, though the new iPhone 5S and iPhone 5C models have sold well. Rival Samsung Electronics Ltd. (SSNLF), however, has a 21% share.