Could India Become Even More Important Than China For Apple?

| About: Apple Inc. (AAPL)

I am sure that by now a lot of you have read that article on iPhone sales in India that was published in today's leading Indian business newspaper? The author, Gulveen Aulakh, has a very catchy title that goes, "From iPhone to Our Phone In A Few Months". Behind those words lie a very powerful message and far reaching implications for Apple (NASDAQ:AAPL) as a company and AAPL as an investment.

I have been in India for the last seven months and a few months ago I pointed out a full page ad in India's leading newspaper, The Times Of India, to subscribers of my website. That ad featured the iPhone 5 with an EMI option and for a small upfront payment, consumers could walk away with the phone and have the next 6 or 12 months to pay for the rest of the balance.

Lets discuss the immediate impact first. Prior to the EMI scheme, the average monthly iPhone sales in India were 70k-80k units/month as per Sunil Tirumalai, an analyst with Credit Suisse. The immediate quarter after the EMI scheme was introduced, sales were up 3x to 4x/month.

IDC Asia-Pacific Mobile Phone Tracker for the December 2012 quarter estimated that Apple's value share in the smart phone market increased to 15.6% from 3.9% in the September 2012 quarter. That is a whopper of an increase by any terms, is it not? Shipments in the December quarter rose to 4.7% of the smart phone market up from a mere 1.3% in the prior quarter. In effect Apple has gone from selling 70-80k iPhones/month before the EMI scheme to a current estimated sales rate of 400k units/month. Furthermore according to Tirumalai, Apple does not have just 3% of the smart phone market but 3% of the overall market in India which translates to roughly 27 million iPhones already in use in India. If that 3% of the overall market sounds woefully low, you are seriously mistaken. India has a population of over 1.2 billion people and there are approximately 893 million cellphones in use in India (per the CIA FactBook).

Last month, Apple stepped it up even more by offering a 18% cash discount on top of the earlier iPhone 4 offer which results in an effective 23-27% discount and almost eliminates the down payment. Which means, you walk in, pick up the iPhone of your choice and just make the monthly interest free payments over 6 months or 12 and you are the proud owner of a highly prestigious (especially in status conscious India) smart phone.

Along with booming iPhone sales, wireless telecom companies are also seeing their data subs increase rapidly along with their ARPU rates thus their bottom lines.

Of course after Apple introduced the EMI scheme, Samsung also started imitating Apple and if now offering their own array of phones under the same sort of plans. As they say, imitation is the sincerest form of flattery. So be it.

If AAPL keeps the innovations flowing, and based on recent comments by Tim Cook, it seems they have some exciting new products coming soon to a store near you. Watch out China, India is watching you!

Disclosure: I am long AAPL, OTC:SSNLF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Long AAPL calls as well