China Mobile released its 4G customers numbers for September and it showed another month of very solid growth. The company added 18.4 million 4G users for a total of 247.6 million and 58 million for the September quarter. This is the largest number of new 4G users it has ever added in a quarter surpassing the 49.1 million in the December 2014 quarter, 53 million in March and 46.6 million in June. China Unicom also had its strongest 3G & 4G quarter ever adding 14.7 million new users. (Note that I own Apple shares).
Since the Chinese smartphone market is so important to Apple’s results this is a positive indication for Apple’s iPhone sales that will be announced next week. It also supports Tim Cook’s statement that Apple has had strong growth in China during July and August, Kantar’s smartphone data that Apple is holding its own vs. competition in China and Morgan Stanley’s AlphaWise survey showing that Apple could be experiencing demand for upwards of 53 million iPhones in the September quarter.
China Mobile and China Unicom had their strongest 4G quarter ever
While 18.4 million new 4G users for China Mobile was the lowest number added in the September quarter it easily made the quarter the strongest ever for the company. The total number of China Mobile 4G users is now 247.6 million or 30% of its total 823 million users. At some point in time the number of new 4G users will have to slow but it appears that won’t happen until sometime next year.
China Unicom also had a very good quarter. It added 14.7 million new 3G & 4G users vs. 6.4 million in the June quarter, 2.3 million in the March quarter and 3.4 million in the December 2015 quarter. I have developed a Google Doc that has monthly details for the three China carriers available via this Google Doc.
Trying to triangulate to Apple’s iPhone sales
I’ve developed a calculation to try and forecast what Apple’s China revenue was in the September quarter based on China Mobile’s 4G user growth. I’ll be the first to admit that this calculation has a number of assumptions in it but overall I believe it is a worthwhile exercise to go through. It is based on taking Apple’s China revenue in a quarter and dividing it by the number of 4G users China Mobile added. The results for the past three quarters are:
December 2014: $16.1 billion in revenue divided by 49.1 million 4G users is $329
March 2015: $16.8 billion in revenue divided by 53 million 4G users is $317
June 2015: $13.2 billion in revenue divided by 46.6 million 4G users is $284
If you take the 58 million new 4G users in the September quarter and multiply it by $250 China would generate $14.5 billion in revenue for Apple. This would be a 10% quarter to quarter increase and up 131% year over year.
I have calculated revenue assumptions for all the other geographies and based on what I believe are solid estimates Apple’s total revenue would be $52 billion, which is above guidance of $49 to $51 billion, the Street’s $51.1 billion forecast and my $51.5 billion estimate. This calculation does not take into account the China Unicom data as it just arrived as I was publishing this note. Since it was the best quarter ever it provides some cushion to my estimate.
