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iPhone Pre-Orders Start at China Mobile (Update 2)

Updated from 10:08 a.m. EST to include Apple comment in the eight paragraph, and additional analysis in the sixth paragraph.

NEW YORK (TheStreet) -- The "secret" is out, as China Mobile (CHL) has started taking Apple (AAPL - Get Report) iPhone reservations, according to its Web site and The Wall Street Journal.

The deal between the two companies has long been reported as being close to final, but the advertisement, showing the iPhone 5s on China Mobile's Web site, indicates a deal is done.

China Mobile confirmed to the Journal that pre-oder sales will indeed start on Thursday, as China recently gave out 4G licenses to its big mobile carriers, including China Mobile, China Telecom (CHA) and China Unicom (CHU).

Last month, China's official state news agency, Xinhua, reported that China would start commercial use of the 4G network and services starting Dec. 18, bringing high-speed Internet access, data and advanced smartphones to the world's most populous country. China Mobile has around 760 million subscribers currently, with approximately 176 million of them being 3G users, the demographic Apple is targeting.

Last week, Cantor Fitzgerald analyst Brian White said Apple is poised to benefit from the announcement of the 4G licensing. "Finally, our research in China over the past year made it very clear to us that an agreement between Apple and China Mobile would need to take place after 4G licenses were issued in China to realize the economics of scale a more global network technology (i.e., TD-LTE can be used outside of China), and this milestone has now been officially reached," White wrote in a research note.

There are already iPhones running on China Mobile's network, despite there being no official deal yet between the two companies. It's believed that there are somewhere between 20 and 40 million iPhones on China Mobile's network, and White said he believes Apple has the capacity to sell a lot more. "We believe Apple can sell 20 million to 24 million iPhones to China Mobile in calendar year 2014 with an EPS impact of approximately $4.00 at the mid-point of our forecast," White wrote in a note delivered to clients last week.

The Chine Mobile deal comes at a time when Apple has finally been able to get iPhone 5s supply and demand almost in balance. When the iPhone 5s launched, there was such exceptional demand for the smartphone that the wait-time numbered in the weeks. Gradually, supplies of the iPhone 5s, which is mostly assembled overseas through Apple's manufacturing partner Foxconn, has come into equilibrium with demand. A look on Apple's Web site showed that the wait-time for the iPhone 5s has fallen to 1 to 3 business days. The iPhone 5c, by comparison, is available to ship within 24 hours.

An Apple spokesman declined to comment on the matter.

Shares of Apple were slightly higher in early Monday trading, up 0.63% to $563.56, while China Mobile shares were slightly negative, losing 2 cents to trade at $55.00.

--Written by Chris Ciaccia in New York

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