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iPhone Kicks Off to Chinese Frenzy (Update 2)

Updated from 10:24 a.m. EST to include additional comments. 

NEW YORK (TheStreet) -- The day finally has arrived.

Friday marked the official launch of Apple's (AAPL - Get Report) iPhone on China Mobile's (AAPL - Get Report) cellular network, with a deal that had long been in the making finally coming together. On Wednesday in an interview with CNBC, China Mobile announced there were 1.2 million pre-orders of iPhones. It's obvious that demand is exceptional and implies that despite the high price of the iPhone 5s and 5c in China Apple customers are clamoring for the devices.

A 16GB iPhone 5s will be priced at 5,288 yuan ($874) China Mobile said, with the 64GB model being priced at 6,888 yuan ($1,139). Apple's mid-tier phone, the iPhone 5c, will be priced at 4,488 yuan for the 16GB model.


Apple CEO Timothy D. Cook was in China for the launch of the iconic devices, even going so far as to sign iPhones for adoring fans.

Cook said earlier this week that the relationship between the two companies is only just getting started, as Apple looks to take advantage of China Mobile's roughly 760 million customers, of which approximately 140 million use China Mobile's 3G service. China Mobile recently upgraded its network to start using TD-LTE 4G speeds, which allow customers to surf the Web and receive data at higher speeds.

It's thought that there are already about 40 million iPhones running on China Mobile's network. For the majority of the lives of those phones, users weren't able to take advantage of all the features of the iPhone, simply because a deal between the two companies wasn't official. Now that a deal is in place, there is already a built-in market for Apple to sell to, including some of the more affluent consumers on the world's largest network.

Apple shares were off 1.4% at $546.71 on Friday, while China Mobile was off 0.18% to $50.08.

It's thought that Cook's comments about Apple's relationship with China Mobile just getting started could mean bigger iPhones ahead, as users seek to move to devices with bigger screens, including those from Samsung, Apple's chief competitor at the high end of the smartphone market.

Cantor Fitzgerald analyst Brian White said he expects Apple to unveil new, larger iPhones in 2014, perhaps catering to China. "Looking beyond the 4-inch iPhone 5s and iPhone 5c, we expect Apple to launch larger iPhones in 2014, including a 4.7-inch and 5.5-inch iPhone that we believe will prove popular in China," White penned in a note. White rates Apple "buy" with a $777 price target.

According to NPD Group, Apple captured 42% of the smartphone market in the United States in the fourth quarter of 2013, with Samsung owning 26% of the market. However, those numbers are reversed in China, with Samsung leading Apple, though market share varies depending on analysis. White believes that Apple could sell as many as 20 million to 24 million iPhones to China Mobile in 2014, representing an enormous upside to consensus estimates on Wall Street.

It could also mean that China Mobile is likely to get Apple's popular iPad tablets. Apple already sells the iPad with cellular data in the United States, through its partnerships with Verizon (VZ), Sprint (S), AT&T (T) and T-Mobile (TMUS).

For now, it's all about the iPhone and how many millions of the phone Apple will sell to adoring fans in China. Judging by the pictures and sentiment on various social networks, including Facebook (FB) and Twitter (TWTR), it looks as if the sky's the limit, one iPhone at a time.

--Written by Chris Ciaccia in New York

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