Apple Shares May See Further Upside on China’s Enormous 4G User Base

NEW YORK (TheStreet) –– Though Apple's (AAPL) new iPhone 6 and 6 Plus are not yet on sale in China, the country's massive adoption of 4G networks bodes well for the company's future in what it has deemed to be an "extremely important" market for it.

China's three major carriers, including China Mobile (CHL) , China Telecom (CHA) and China Unicom (CHU) all reported August mobile subscriber numbers, detailing that 3G (subscribers who use data plans) decelerated to 38% growth, year over year.

Cantor Fitzgerald analyst Brian White believes that has to due with the country's transition to 4G, and customers waiting for the iPhone 6 and iPhone 6 Plus. "We believe there are a few important catalysts for Apple in 2H:CY14, including the ramp in China," White said in the note. "For example, we believe consumers in China are on pause as they eagerly await the iPhone 6 and iPhone 6 Plus, which we expect to launch before the end of 2014."

In total, there are 1.678 billion subscribers (wired, wireless and broadband) in China, with 1.273 billion wireless subscribers, making China the world's largest cell phone market by far. For comparison, India and the U.S. are the next largest markets, with just over 900 million and 327 million subscribers, respectively. (Note: The U.S. data counts each phone for people who have more than one).

Apple has repeatedly said how important China is to the country's future, which makes getting the iPhone 6 and iPhone 6 Plus into the country as fast as it can a priority. In Apple's fiscal third quarter, it said it generated 28% revenue growth year over year in Greater China, making it its higher growth area by far. It's also second in terms of overall revenue, with $5.94 billion coming from Greater China, second only to the $14.58 billion from the Americas.

Though Apple generates the majority of its revenue from the iPhone, its other products, including iPad and Mac, continue to perform well in China, with Apple CEO Timothy D. Cook noting the market surprised Apple executives at just how strong it is, prior to the launch of the iPhone 6 on Sept. 19.

"China, honestly was surprising to us that it was -- we thought it would be strong but it well went past what we thought," Cook said on Apple's fiscal third quarter earnings call. He mentioned that the Mac was up 39% vs. a Chinese PC market that was expected to contract by 5%, and the iPad sales grew 51% in China, showing just how important the market is for Apple.

In January of this year, Apple officially announced its deal with China Mobile, the nation's largest carrier, bringing the iPhone officially to more than 750 million subscribers.

China Mobile and China as a whole continue to roll out their expansion of LTE (Long Term Evolution) networks. The country started with TD-LTE and are working on expanding FDD-LTE, which will bring additional LTE coverage to the country.

Monday, Apple announced it sold over 10 million new iPhone 6 and iPhone 6 Plus smartphones, despite being supply constrained and not being in China.

"Sales for iPhone 6 and iPhone 6 Plus exceeded our expectations for the launch weekend, and we couldn't be happier," Cook said in a press release, announcing the numbers. "We would like to thank all of our customers for making this our best launch ever, shattering all previous sell-through records by a large margin. While our team managed the manufacturing ramp better than ever before, we could have sold many more iPhones with greater supply and we are working hard to fill orders as quickly as possible."

The opportunity for Apple is enormous in China, with China Telecom, China Mobile and China Unicom having approximately 500 million 3G subscribers, the segment Apple is focusing on. Apple's success in China will not be measured by one month's worth of data, nor a single quarter. Cook and his team in Cupertino have continuously stressed that China is an enormous opportunity for Apple, with the rollout of 4G/LTE continuing to play an important role in that success.

Even if it comes a little later than expected.

-- Written by Chris Ciaccia in New York

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Follow @Chris_Ciaccia

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