Apple Inc. (NASDAQ:AAPL) and CEO Tim Cook have been working hard on a strategy for improving market share of its iPhone devices in China. With prominent billionaires like Julian Robertson of Tiger Management and David Einhorn of Greenlight Capital invested in Apple as a continued growth stock (with a combined $800 million invested at the end of September), expansion in China may likely be the key to whether Apple maintains its double-digit growth pattern.
But Apple still has no deal with China's largest telecom company, China Mobile Ltd. (NYSE:CHL).
While many observers and analysts believe the deal will happen, Apple is finding that it is gaining market share in China without the deal, working through China Telecom Corporation Limited (NYSE:CHA) and China Unicom Limited (NYSE:CHU), thanks to their iPhone contracts and 3G network capabilities. So that seems to turn the question around on any deal with China Mobile from: when does Apple need China Mobile, to when will China Mobile realize that it needs Apple?
Based on subscriber data out of China, Apple Inc. (NASDAQ:AAPL) seems to have some serious leverage with any deal regarding China Mobile. Why?
Evercore Partners analyst Rob Cihra said that the telecom has lost seven percentage points of market share to 37 percent, while China Telecom and China Unicom have combined to gain seven percentage points of market share to 63 percent. Part of the credit for the swing in market share is attributed to the 3G capabilities of the smaller companies, as well as their contracts with Apple Inc. (NASDAQ:AAPL) to sell the iPhone 5.
"We think China Mobile could be starting to 'need' the iPhone more, since it has seen its 3G market share erode," Cihra wrote in his research note. Kim Eng analyst Andy Poon seemed to affirm that sentiment, noting that China Mobile's 3G market share in November dropped 16 percent over October, while China Telecom and Unicom both added subscribers.
So why else should China Mobile want to work with Apple Inc. (NASDAQ:AAPL)?