Apple's expansion to two additional carriers in China could bring in an extra 40 million iPhone buyers next year, according to a new analyst note.
Morgan Stanley analyst Katy Huberty sent a note to investors yesterday (picked up by Apple Insider), suggesting that Apple this year will expand its mobile presence in China by making deals with China Telecom and China Mobile--the latter being the world's largest wireless carrier with about 650 million subscribers.
Huberty suggests Apple's next iPhone will be offered on both of those new networks, and with an estimated 20 percent of customers in the high-end tier buying the device, that would bring in an extra 24 million iPhone units sold in 2013.
So where does the magical 40 million number come from? Huberty suggests China's rising middle class could expand the number of customers who make up that high-end tier, pushing sales up to 40 million.
Apple currently has a deal with China Unicom--the two companies inked a three-year agreement to offer the device there, beginning with the iPhone 3G in 2009. Huberty says that deal holds the potential for about 15 million subscribers of the carrier's "high-end" subscribers, with China Telecom and China Mobile extending the potential by an extra 135 million customers in that category.
Apple sold a record 37 million iPhones in its first fiscal quarter, which the company reported last week. Apple only began selling the iPhone 4S in China earlier this month, which was not included in that tally. The phone drew massive crowds there, which turned into a small riot in Beijing after the company announced it would not be selling the device on its pre-announced launch day. In a call with analysts last week, Apple CEO Tim Cook said "we thought we were betting bold," about initial sales of the iPhone 4S there, but that "we didn't bet high enough."
Apple has been rumored to be working on deals with China Telecom and China Mobile for months, murmuring that peaked just ahead of the announcement of the iPhone 4S in October. China-based Sohu.com in August reported that China Telecom and Apple had reached a "preliminary agreement" to sell the new device sometime before the end of October, a deal that did not materialize. Before that, Reuters had claimed China Telecom was on track to get the iPhone by the end of the year.
The situation with Apple and China Mobile was said to be a bit more precarious, with a report in November from Sterne Agee analyst Shaw Wu saying that the carrier had demanded a cut of Apple's App Store revenue if it were to carry the device--an unorthodox agreement by Apple's standards. That said, things seemed a bit further along given China Mobile CEO Wang Jianzhou's mention during a press conference that he had been in talks with late Apple co-founder and CEO Steve Jobs about bringing the device to the network, and that the two were working together to "come to an agreement as soon as possible."