Apple to begin selling iPhones in China this year, giving it access to huge market

By Jeremiah Marquez, AP
Friday, August 28, 2009

Apple seals deal to bring iPhones coming to China

HONG KONG — Apple Inc. will get to sell the iPhone in the world’s biggest cell phone market now that it has reached a deal with a Chinese wireless carrier, China Unicom Ltd.


Under a multiyear deal announced Friday, the iPhone is expected to go on sale in the fourth quarter, China Unicom executives said in Hong Kong. They declined to give financial details or reveal how much the iPhone would cost, saying only that the price would be “competitive.”

Unicom, one of three major state-owned carriers, would be the first Chinese phone company to formally support the iPhone, though unlocked iPhones brought in from other markets are in wide use in China.

China’s mobile market trails the United States, Japan and some others in financial size but it has 650 million mobile phone accounts and is seen as a major prize for foreign firms. However, Edward Yu, chief executive at Analysys International, a Beijing-based technology research firm, said it remains to be seen whether the iPhone will appeal to “the mainstream China population.”

Apple’s talks with potential Chinese carriers had snagged on disagreements about how to share revenue, according to Chinese news reports. Unicom Chairman and CEO Chang Xiaobin said the companies will not share revenue, with Unicom instead buying the phones in batches from Apple and offering them with subsidies.

Chinese media reported that Unicom had secured a three-year exclusive deal to carry the iPhone and had agreed to buy 5 million handsets for 10 billion yuan ($1.5 billion), but Chang said those stories were false.

Analysts at Bank of America Merrill Lynch say the phone could sell for between $99 and $299 with two-year service contracts.

Many Chinese already own smuggled iPhones purchased on the country’s thriving gray market. There are well over 1.5 million of the devices in China, according to estimates by BDA China Ltd., a Beijing technology research firm.

Analysts said that could work in Apple and China Unicom’s favor, providing a ready pool of users who might be willing to upgrade to an authorized iPhone that offers a warranty, fewer glitches, more applications and faster speeds.

Apple spokeswoman Jill Tan in Hong Kong did not respond to an e-mail seeking comment.

Apple is competing in an increasingly crowded market for smart phones, including the BlackBerry from Research in Motion Ltd. and devices that use Google Inc.’s Android software. PC maker Dell Inc. also is working on a smart phone for China Mobile Ltd. and showed a prototype in Beijing last week. Dell has declined to say when the phone would be ready for use.

The iPhone — which also functions as a music player, camera and Internet browser — could help Unicom compete against giant China Mobile, which dominates the mainland’s mobile market.

Unicom says it had 133 million accounts as of Dec. 31, while China Mobile, the world’s biggest phone company by subscribers, says it has more than 450 million.

Apple shares rose $1.47 to $170.92 in morning trading.

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