China Mobile Takes Initial Hit From Apple Partnership
Will Apple’s (NASDAQ:AAPL) partnership with China Mobile (NYSE:CHL) negatively impact the world’s largest carrier in the short term? Soon after Apple confirmed the iPhone distribution deal with China Mobile on December 22, many analysts began lowering their earnings estimates for the telecom giant, reports the Wall Street Journal.
According to the Wall Street Journal, Mizuho Securities analyst Marvin Lo estimated that the carrier’s net profit would fall by 10 percent this year. Similarly, Credit Suisse analyst Colin McCallum lowered his net profit expectations by 9.1 percent and reduced his price target on China Mobile shares by 6 percent to $12. McCallum cited increased mobile phone subsidies as well as an interconnection policy change that favors China Mobile’s competitors.
Although both companies will likely benefit in the long term from the partnership, it appears that China Mobile is currently holding the short end of the stick. According to the Wall Street Journal, most analysts have cited China Mobile’s capital expenditures related to the establishment of a new 4G network and upcoming subsidies for the newly available iPhones as the reasons for the reduced earnings forecast.