Apple Inc''s deal to sell the iPhone in China is seen as just the beginning of its dealmaking in the world''s largest mobile phone market. The three-year deal with China Unicom, the country''s second-largest carrier with more than 14O million customers, is not exclusive, in sharp contrast to its US arrangement with AT&T Inc.
Exclusivity would have severely hurt Apple''s chances of growing much beyond Unicom''s customer base. As it is, Apple is free to pursue deals with China Mobile, which has 500 million subscribers, and China Telecom, with another 42 million subscribers. Those numbers are staggering, even for a company of Apple''s size. China''s 700 million mobile subscribers are more than that of the United States and Europe''s combined.
"You always worry whether the growth rates in Apple''s profits will slow or if they can sustain themselves," said Adam Harter, an analyst at Financial Enhancement Group, which owns Apple shares. "But opening a new market is a great positive to keep that growth rate going."
Susquehanna Financial Group, whose parent makes a market in Apple shares, estimates Apple could get roughly 3 percent of China''s market, which would equate to an extra 2 million iPhones sold over the next year. What is more, Susquehanna analysts said every 1 million extra iPhones sold is equal to 18 cents to 20 cents of earnings per share. Apple is expected to earn $5.85 a share for its 2009 fiscal year, according to Reuters Estimates. Other analysts are even more bullish on Apple in China.
"We estimate they can have roughly 10 percent share in calendar year 2010 so our total iPhone estimates for calendar year 2010 for Apple are 37 million units," said Brian Marshall, analyst at Broadpoint AmTech. "I think roughly 15 to 20 percent of the numbers next year are going to come directly from China, so this is a huge deal," Marshall added.