China Telecom Confirms iPhone 4S Launch As Early As February

by Trefis Team
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China Telecom
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China Telecom (NYSE:CHA) and Apple (NYSE:AAPL) are both set to reap the benefits from the iPhone 4S launch on China Telecom’s network. According to a report in China Daily, China Telecom could start selling the device as early as the end of February or the beginning of March. [1] In this regard, China Telecom joins China Unicom (NYSE:CHU), which was thus far the only operator offering the iPhone with contract in China. This is a big win for Apple as well and will help it expand its presence in China. Meanwhile, the deal with China Mobile (NYSE:CHL), which is the largest wireless carrier in the world, still remains in the works for Apple.

Our $68 price estimate for China Telecom stock is about 20% above market price, and our $550 price estimate for Apple stock is also about 20% above market price.

See our complete analysis of China Telecom here|See our complete analysis of Apple here

Potential Impact of iPhone 4S Launch on China Telecom

In mid-January, Chinese regulators approved Apple’s application for a handset that operates on the CDMA2000 network standard, a technology supported by China Telecom (Read China Telecom Readies for iPhone Frenzy as Demand Boils). With this deal, China Telecom will not only gain more 3G subscribers, but also will boost its average revenue per user (ARPU). However, this gain could come at the expense of reducing margins, as the iPhone generally carry higher subsidies than a normal smartphone.

Apple to Expand Base in China

With this deal, Apple could potentially sell iPhones to 36 million 3G subscribers of China Telecom, which is huge for the company. Apple already sells the iPhone with a contract on the China Unicom network, which has roughly the same number of 3G subscribers. Apple can now double its addressable market in China with the China Telecom deal (Read Apple Can Expand Addressable Market by Selling iPhone through China Telecom).

China Mobile is Next Frontier for Apple

The next frontier for Apple would be to sell the iPhone on the network of China Mobile, the largest wireless provider in the world with more than 600 million subscribers. Although Apple has been in talks with the carrier for quite some time, a significant bottleneck is the iPhone’s lack of compatibility with China Mobile’s home-grown TD-SCDMA network.

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Notes:
  1. Beijing Telecom may launch CDMA iPhone 4S, China Daily, January 31st, 2012 []
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