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Published: September 6, 2009
The iPhone was initially available only in the U.S., United
Kingdom and parts of Europe. Now the ubiquitous touch-screen
smartphone is around the world. While many countries are
untapped markets for the popular device, one stands out.
China.
Now Apple (Nasdaq: AAPL) has made a three-year deal
with China's second-largest mobile phone carrier. With the
addition of China, the iPhone is now available in a market
larger than the U.S. and European Union combined. China already
has more wireless subscribers than there are people in either
the U.S. or EU -- and that's true even though half of China's
population doesn't cell phones.
While the benefits to Apple are
good, the benefits to its partner
are even better. Unlike other deals
Apple has made with wireless
providers, its Chinese operator will
not share revenue. Instead, the
Chinese company gets all of it. It
will simply buy iPhones wholesale
and resell them to its customers. It
gets 100% of the service revenue and
100% of the profit from the retail
sale of the phone.
While pricing hasn't yet been released, the company already
has more than 140 million wireless users, about 20% of the total
market. The company expects that the addition of the iPhone will
attract not only more customers, but also high-spending
customers, which will boost earnings.
China Unicom (NYSE: CHU) has a market cap of $34
billion. CHU also pays a small dividend that amounts to a 2.2%
yield at recent prices. (Apple paid its last dividend in 1995).
CHU is also more attractively priced. Its forward P/E is 19.7,
compared with AAPL's 28.9.
If you want to get a chance to profit from the massive
potential the iPhone has in China, forget Apple. China Unicom is
the better investment by far.
Good Investing!
Anthony Haddad
Staff Writer
StreetAuthority.com |
