The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.NEW YORK ( Trefis) -- China's largest wireless service provider China Mobile ( CHL) announced Monday that it now has about 15 million iPhone customers on its network. This is despite not having signed a formal deal with Apple ( AAPL) to sell the iPhone. China Mobile has a huge mobile subscriber base of more than 655 million, dwarfing its U.S. counterparts Verizon ( VZ) and AT&T ( T) by more than six times. Apple has already signed deals with both China Unicom ( CHU) and China Telecom ( CHA) to sell the iPhone. With China nearing a billion-strong mobile subscriber base, signing a deal with China Mobile will present Apple with a huge opportunity in its quest to reach a
Assuming that China Mobile gets the iPhone in October this year when the iPhone 5 is released, and that it starts off by selling the subsidized version to an additional 1.5 million users every month, it could sell around 5 million additional iPhones in the last quarter of 2012. Going forward, it could sell around 25 million additional iPhones in 2013 at a little higher than the 2012 rate. For arriving at the long-term average sales, we look at AT&T's percentage of iPhone activations to total retail subscriber base for 2011. AT&T had about 17.5 million iPhone activations in 2011, and it ended the year with more than 76.5 million subscribers, taking the required percentage close to 23% in about four years for which it has had the iPhone. If China Mobile manages to reach this percentage by 2018, it could be selling close to 200 million additional iPhones a few years out. In our analysis, we are taking a more conservative estimate of 120 million additional iPhones by 2018 to arrive at a price estimate of $650, an upside of about 15% to
our current price estimate. This is just the effect of an increase in market share of Apple's iPhone. However, if carrier subsidies cause Apple to maintain its current pricing, as opposed to the declines that we show, the upside could be much higher. You can move the trend line in the chart below to make your own forecast for Apple's value. Our assumptions are contingent on China Mobile actually leading the 3G race in the same way as it has dominated 2G. The current 2G scenario is heavily biased in favor of China Mobile, but its 3G advantage is not so significant. If China Mobile is unable to leverage its huge 2G lead and turn it into a 3G advantage, the scenario may not play out as described above. Having China Unicom and China Telecom in the bag may help Apple cover a bit of lost opportunity in China Mobile, but for the China story to play out, its largest wireless carrier must deliver. Click here to find out how a company's products impact its stock price at Trefis Like our charts? Embed them in your own posts using the Trefis Wordpress Plugin.