Whetting the Appetite
While there are some technical difficulties to making a deal, like China Mobile Ltd. (ADR) (NYSE:CHL)’s use of non-industry standard technology, those details could probably be worked around easily enough. And a partnership would make sense for both companies. Apple would get access to a market it covets and China Mobile Ltd. (ADR) (NYSE:CHL) would get a phone that customers want. Moreover, data usage would likely increase revenues at the industry giant at a faster clip then it is seeing today without the iPhone.
The recent results at China Telecom Corporation Limited (ADR) (NYSE:CHA) prove this out. The company is the third tier player in the market with only around 160 million subscribers. It started selling the iPhone last year. Although the cost of selling the new phone was a drag at first, the recently ended quarter’s results show that the partnership is starting to pay off.
The company posted solid increases in customers and data usage. It makes the company’s future look brighter than it did before the deal. Income investors probably won’t be too interested, since the stock yields less than 2%, but growth investors should take a look. Meanwhile, watch China Mobile Ltd. (ADR) (NYSE:CHL)’s iPhone ambitions as a potential catalyst to improved business performance.
But China Mobile Ltd. (ADR) (NYSE:CHL)’s results are really only a tease for Apple and its shareholders. In a market that is so large, Apple is only dealing with a second stringer. If the company wants to keep the top line going, it needs a deal with China Mobile Ltd. (ADR) (NYSE:CHL). The sooner the better.
A Floor
The company’s recent dividend moves have created something of an interesting situation for investors. With a yield of around 3%, Apple has a decent dividend yield. In fact, many would even call it enticing. That should put a floor under the shares. And it isn’t as if the company is struggling. It still has industry leading products that are selling well.
Income investors should be examining Apple at this point. The question still boils down to whether or not the company can continue to grow its business over the long term, but the risk/reward profile is materially altered by the 3% or so dividend yield. For example, even if it takes a few years to fully crack the China market, Apple shareholders still get the benefit of the dividend while they wait.
It doesn’t take much of an imagination to think that other mobile operators in China will see the results at China Mobile Ltd. (ADR) (NYSE:CHL) and want to get in on the action. While that won’t happen overnight, the potential is huge. Income investors who’ve shied away from Apple because of its previous growth orientation should review that decision.
The article Close Enough To Touch originally appeared on Fool.com and is written by Reuben Brewer.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
