After months of speculation, Apple (NASDAQ: AAPL ) is reportedly playing nice with China Mobile (NYSE: CHL ) . A source told The Wall Street Journal that a deal is finally in place for the world's largest wireless carrier to start stocking the iPhone.
It's easy to see why Apple fans are welcoming the news. China Mobile had 759.3 million customers at the end of October. Think about that. We're talking about more accounts than the entire populations of all nations outside of China and India.
However, we also have to be realistic here. For starters, the vast majority of China Mobile customers are still on old feature phones. Just 176 million — or 23% — of China Mobile customers have smartphones on 3G plans. It's a number that's growing at a heady pace. China Mobile had just topped 90 million 3G customers when the year began. But it's safe to say that most of China Mobile's customers may not be financially ready to take on a smartphone with a data plan.
Chinese customers are also more likely to flock to cheaper Android phones. The Wall Street Journal cited a report from market researcher Canalys showing the iPhone's share of the smartphone market at just 6%. That's half of the 12% global market share that fellow researcher Gartner reported based on worldwide shipments during the third quarter. Then again, how much of this is a matter of Apple pricing its products out of mass-market appeal in countries with no or limited carrier subsidies, and how much of this is simply the lack of being officially offered by China Mobile?
The good news for Apple investors is that getting onto China Mobile will be incremental for iPhone sales. In upgrading his rating on Apple earlier this week, UBS analyst Steven Milunovich suggested that China Mobile could deliver 10 million iPhone buyers a year. Research firm Trefis was a bit more optimistic, targeting 1.5 million iPhones a month, or 18 million a year.
Apple's already selling more than 150 million iPhones per year, so we're not talking about a dramatic spike in sales through China Mobile. But the move itself would validate Apple's presence in the world's most populous nation by finally being carried by all three of the largest wireless service providers in the Middle Kingdom.
The deeper push into China may even inspire Apple to finally put out a cheaper iPhone that can compete with the glut of low-priced Android handsets. The iPhone 5C just isn't the answer in markets where carriers are reluctant to bankroll most of the purchase price through subsidies. In short, Apple working with China Mobile may not be the big deal that everyone expects it to be initially, but it can be even bigger than that down the line.
