China 3G Subscribers Surge, But One Carrier Struggles (AAPL)

December 26, 2012 8:16 AM EST
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The Chinese are adopting 3G at a rapid pace. However one major non-Apple (NASDAQ: AAPL) iPhone carrier is under-performing the others.

In November, 3G subscribers at the three major Chinese carriers - China Telecom (NYSE: CHA), China Mobile (NYSE: CHL) and China Unicom (NYSE: CHU) - rose 88 percent from the prior year to 221.6 million, noted Topeka Capital's analyst Brian White.

Despite the rapid growth, 3G subscribers still only represent 20.1% of China's wireless subscribers (up from 12.2% a year ago), which remains low relative to the developed world and provides significant growth opportunities for mobile device companies like Apple for years to come.

White expects 3G subscribers in China to reach at least 230 million by the end of 2012 and is projecting 325 million to 350 million 3G subscribers by the end of 2013. This compares to just 127.5 million 3G subscribers in China at the end of 2011.

Importantly, China Mobile represents 64% of the total wireless subscribers in China but only 37% of the 3G users and down from 41% of 3G users a year ago. Of the three major carriers in China, China Mobile is the only one that does not have a relationship with Apple to sell the iPhone. White expects this to change in 2013.

While China Mobile struggles in 3G, the others two carriers - which both sell the iPhone - are flourishing. China Telecom delivered the fastest MoM growth in 3G subscribers in November, Whited noted, increasing by 5.0%, followed by China Unicom at 4.6% and China Mobile at 3.9%. Over the past year, 3G subscribers at China Telecom and China Unicom in aggregate have grown by 99% to 139.2 million versus up 72% for China Mobile to 82.4 million.

The two carriers are likely to continue to gain given the launch of the iPhone 5 on December 14, the analyst notes. During the first three days of availability, Apple sold over 2 million iPhone 5 in China.

While White doesn't explicitly say this, gains by the two other carriers in 3G over China Mobile could push the holdout into a deal with Apple sooner rather than later.

White maintained his Buy rating and Street-high price target of $1,111 on Apple.

For an analyst ratings summary and ratings history on Apple click here. For more ratings news on Apple click here.

Shares of Apple closed at $520.17 Monday.

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