Qualcomm Chips Key To China Mobile iPhone Deal


Shares in China Mobile this week hit 31-month highs on views that it’s strategy to launch fourth-generation wireless data services is gelling — boosted by new Qualcomm chips — and that it could be selling Apple’s iPhone by October.

China Mobile’s (CHL) U.S. shares are up 15% in 2012.

China Mobile is its nation’s dominant carrier, but it still lacks a deal to sell Apple’s (AAPL) iPhone. China Telecom (CHA) in March became the country’s second carrier to sell the iPhone, joining China Unicom (CHU).

One big issue for China Mobile is that it uses a government-backed home-grown third-generation network technology, TD-SCDMA. But it also uses a variant of fourth-generation LTE, long-term evolution, technology, called TD-LTE. Wireless firms worldwide are building 4G LTE networks, which bring the fastest broadband wireless speeds now available.

HSBC’s Hong Kong analyst upgraded China Mobile’s stock to overweight Monday, and said its iPhone launch is “imminent.” Most of China Mobile’s customers, though, at first would use the iPhone on China Mobile’s 3G network, until its 4G services are commercially ready.

But new chipsets from Qualcomm (QCOM) will let the iPhone and smartphones that run on Google ‘s (GOOG) Android platform run on both 3G TD-SCDMA and 4G TD-LTE, wrote HSBC analyst Tucker Grinnan in a report.

“Qualcomm is producing these chips now,” Grinnan wrote. “Integration into the iPhone 5 and other leading handsets will allow China Mobile to leverage its vast and underutilized 3G network as well as move early to 4G.

“This will level the technology playing field, help China Mobile to lock in its top 80-100 million high-end customers … and support a major rerating.”

He also says increasing 4G sales would “mean we expect China Mobile to return to double-digit revenue growth.”

China Mobile has some 656 million subscribers, the most in the world. More than 15 million of its customers already use iPhones, even though it doesn’t officially sell the device. “Unlocked” iPhones, and other unlocked devices, are sold in China’s gray market.

China Mobile has been losing market share to both China Unicom and China Telecom. China Mobile’s stock in general has lagged since China’s government took steps in 2008 to increase competition.

In a report released Friday, Credit Suisse analyst Colin McCallum said he sees a rebound.

“The solution to this difficult transitional phase for China Mobile is full commercial launch of TD-LTE, which we expect in 2014,” wrote McCallum, who is based in Hong Kong.


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