Apple Inc. (AAPL), China Mobile Ltd. (ADR) (CHL): How to Invest in China’s Explosive Mobile Growth

The world’s largest market for smartphones is China. Smartphone shipments in the country are expected to spike to as many as 460 million by 2017, according to research firm IDC. China’s mobile Internet market in general is expected to explode over the next five years, with Morgan Stanley (NYSE:MS) putting a $30 billion price tag on it by 2015. So, what is the best way for you to take advantage of this growing trend?

Smartphones and China…

Apple Inc. (NASDAQ:AAPL) and Samsung are the two most dominant foreign companies in the Chinese mobile market. Samsung has a larger presence than Apple, with a 19% share of the $80 billion Chinese smartphone market alone– a lead of over 10 percentage points, according to IDC. Samsung also has three times as many retail stores as Apple in China.

Samsung opened its first office in the country way back in 1985, which gives it the first-mover advantage. Apple Inc. (NASDAQ:AAPL) only recently stepped into the country in comparison to its rival. But the latter company is not just sitting on the sidelines, and may have bigger plans for expansion.

Apple Inc. (NASDAQ:AAPL) CEO Tim Cook recently met with China Mobile Ltd. (ADR) (NYSE:CHL) Chairman Xi Guohua in Beijing, discussing “matters of cooperation”, according to Reuters. China mobile is not only China’s largest mobile carrier by subscriber base, but also the world’s largest. The company, with a market cap of over $200 billion, is twice the size of its two main domestic competitors China Telecom Corporation Limited (ADR) (NYSE:CHA) and China Unicom (Hong Kong) Limited (ADR) (NYSE:CHU) combined. It is also the only carrier of the three that doesn’t offer iPhones.

Greater China (which includes Taiwan and Hong Kong) accounted for roughly 13% of Apple Inc. (NASDAQ:AAPL)’s overall sales in its most recent quarter– equating to around $5 billion. Tim Cook is looking to reverse the trend of slumping Greater China sales, which dropped by 43% from April through June. Apple badly needs a deal with China Mobile, and investors have awaited one for quite some time now.

The world’s largest carrier…

A deal with Apple Inc. (NASDAQ:AAPL) would also benefit China Mobile Ltd. (ADR) (NYSE:CHL), which would most likely see an immediate pickup in sales if they were able to offer iPads and iPhones to their consumers. China Mobile would also gain many new customers as well.

And then there’s Samsung. The Korean giant, unlike Apple, already has a working relationship with China Mobile Ltd. (ADR) (NYSE:CHL), and recently sold 12.5 million handsets in China in the first quarter of 2013–  double the amount of iPhone sales in the same period. Many of these handsets were likely sold through China Mobile. This further illustrates the fact that Apple Inc. (NASDAQ:AAPL) needs to jump on board. It would definitely help them boost sales in their second biggest market.

So who’s the real winner here? It looks like China Mobile Ltd. (ADR) (NYSE:CHL), who is benefitting from the Chinese mobile revolution from smartphone sales from Samsung and other local Chinese handset makers. Getting Apple on board would be a huge added bonus.

Valuations

How does China Mobile Ltd. (ADR) (NYSE:CHL) stack up as an investment?