China Unicom (Hong Kong) Ltd. (CHU) is working with Apple Inc. (AAPL) on introducing the iPhone with WiFi functions to China as soon as possible, China Unicom Chief Executive Chang Xiaobing said Saturday, without giving a more specific timetable.

Meeting with reporters on the sidelines of the National People's Congress, Chang added that if the company releases a WiFi-enabled iPhone, it will consider compensating current users who lack the function by allowing greater use of the company's third-generation network.

Government regulations had forced Unicom to launch the iconic smartphone in China without WiFi, but newly revised regulations now make it possible. WiFi allows users to browse the web via a standard wireless Internet connection, rather than through an operator's 3G network, thus potentially saving money on usage fees.

Chang said the iPhone in China is priced similarly to iPhones in other markets after calling plan costs are taken into account, but added he understood people would like to see lower prices. China Unicom will lower iPhone prices if conditions permit, Chang said. He declined to comment on whether the company has any plans at present to lower the price.

Not including discounts on service, Apple and Unicom charge $730 to $1,020 for the iPhone, making it more expensive than "gray market" iPhones brought into the country through such places as Hong Kong.

China Unicom is the only Chinese telecom operator that offers the iPhone in China, though larger rival China Mobile Ltd. (CHL) has repeatedly said it is in talks with Apple to offer the iPhone in the country.

Chang said China Unicom and its parent company's capital expenditure would fall this year, as it reduces spending on areas such as broadband. The company said in March last year that it expected capital expenditure to be CNY110 billion in 2009, up from CNY70.49 billion the previous year.

"This year our overall investment will clearly decrease from last year's level," he said. "But 3G development remains our investment priority for 2010, we will absolutely not slow the pace of 3G development."

Chang said there is tremendous room for growth of the 3G market in China. He cited analyst forecasts that predict 3G users will account for 20% of global mobile phone users by the end of this year, while in China the proportion is much lower.

China Unicom had 145.7 million 2G users and 3.6 million 3G users at the end of January. China Mobile had 3.9 million 3G users out of a total of 527.4 million mobile users, making it the largest mobile operator in the world.

Chang said China Unicom currently has no plans to invest in a bank and doesn't think it necessary to take a stake in a bank to develop mobile payments. But he stressed that Unicom is interested in developing mobile payment operations. His comment comes after China Mobile said earlier this week it is in talks with Shanghai Pudong Development Bank Co. on taking a stake in the lender. The move could help it expand into mobile e-commerce.

-By Aaron Back, Dow Jones Newswires; (8610) 8400-7701; aaron.back@dowjones.com
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