UPDATE:China Unicom In Deal With Apple To Sell iPhone
August 28 2009 - 7:10AM
Dow Jones News
China Unicom Ltd. (CHU) clinched an exclusive deal to sell Apple
Inc.'s (AAPL) iPhone in China, bringing the popular device to the
world's largest mobile market in terms of subscribers.
The country's second-largest mobile phone operator after China
Mobile Ltd. (CHL) said it has signed a three-year agreement to
purchase iPhones from Apple on a wholesale basis. The two
companies' deal doesn't include revenue sharing.
China Unicom hopes the iPhone will give it a long-sought
competitive edge over its larger rival, China Mobile, allowing it
to attract an elite customer base in Chinese cities, where
cellphones are often status symbols. China Unicom had 141 million
users at the end of July, compared with 498 million for China
Mobile, the most of any carrier in the world.
China Unicom offers third-generation mobile services based on
the wide band code division multiple access technology widely used
in Europe and Asia. China Mobile Mobile is saddled with a
less-mature, domestically developed 3G mobile standard.
Nonetheless, it is planning to roll out several high-end phones to
vigorously compete for 3G market share.
On Monday, Taiwanese phone maker HTC Corp. announced plans to
launch seven 3G phones with China Mobile, including at least one
running on Google Inc.'s Android operating system. China Mobile has
also announced plans to release 3G phones with international
partners such as Nokia Corp. and Samsung Electronics Co.
China's third major wireless carrier, China Telecom Ltd. (CHA),
is in talks with Research In Motion Ltd. to offer its Blackberry
handsets in China, and with Palm Inc., maker of the Palm Pre
handset. China Telecom had 42 million wireless users at the end of
July.
China Unicom Chairman and Chief Executive Chang Xiaobing said at
a news briefing that the company will offer two versions of the
third-generation iPhone in the fourth quarter.
Chang said China Unicom will offer subsidies to customers who
buy the handset, lowering its price, but didn't elaborate on the
level of the subsidy. The phone will boost China Unicom's average
revenue per user, said the executive.
The company's mobile average revenue per user fell to CNY41.7 in
the six months ended June from CNY43.6 a year earlier.
Investors are eagerly anticipating details on pricing for the
phone and the service package, which weren't disclosed Friday.
Chang said the phone will be sold with its Wi-Fi Internet
function disabled, which is required by Chinese regulations.
Apple spokesman Alan Hely confirmed the deal with China Unicom,
but declined to give further details.
It remains to be seen how much of a hit the iPhone will be in
China. China's unique, character-based language means user
interfaces popular in western countries don't always catch on with
local users.
There is also already an underground market for iPhones in
China, which are hacked to enable them to work on any network
carrier. Beijing-based research firm BDA China Ltd. estimates that
there are 1.5 million such iPhones in China already.
The iPhone deal comes alongside the rollout of China Unicom's
new 3G network. Chang said Friday that the official commercial
launch of the network will be on September 28, covering 285 cities.
It plans to expand its 3G network coverage to 335 cities by the end
of this year.
China Unicom Executive Director and President Lu Yimin said the
company aims to take more than one-third of China's 3G mobile
market next year, adding the company expects 3G users will make up
20% of China's mobile market in 2010.
China Unicom's announcement on the Apple deal came as the
company said its first-half net profit fell 45% from a year
earlier, dragged down by a decline in its fixed-line business and
intensified market competition.
Net profit for the six months ended June 30 fell to CNY6.62
billion ($970.4 million) from a restated CNY12.09 billion a year
earlier. Revenue fell 6.3% to CNY76.32 billion from a restated
CNY81.46 billion a year earlier.
Chief Financial Officer Tong Jilu said the company expects its
net profit to stabilize in the second half on stringent cost
control and continued growth in mobile revenue.
The company restated the year-earlier figures to reflect its
merger with fixed-line operator China Netcom Group Corp. in
October.
-By Lorraine Luk and Aaron Back, Dow Jones Newswires; (8610)
6588-5848; lorraine.luk@dowjones.com