iPhone or oPhone?

Will Unicom steal a 3G march on rivals with Apple’s popular device?

iPhone or oPhone?

The 'apple' of China Mobile's eye

Alas, a courtship that never led to marriage.

For the last couple of years, Apple has been flirting with China Mobile – the world’s largest telecom operator – to launch its popular iPhone in the mainland.

But to no avail. Apple has opted instead to ink a deal with rival operator China Unicom.

With 450 million subscribers, China Mobile clearly dwarfs China Unicom’s 133 million. But Apple’s negotiations with the telecom heavyweight were reputedly hard-nosed ones. As the Southern Metropolis Weekly puts it: “The world’s largest operator will not accept these kind of terms under duress.”

China Unicom, on the other hand, was more willing to grin and bear it. The company’s CEO, Chang Xiaobing took personal charge of the negotiation to demonstrate his company’s enthusiasm.

Industry observers reckon Apple and China Unicom have settled on a three-year deal for the new iPhone 3GS, says the Shanghai Securities News. Unicom will purchase iPhones from Apple at Rmb3,000 ($440) each and guarantee annual sales of at least 1 million units. Global sales of iPhones (all models) have reached 26 million units. Neither company has confirmed the report.

“The cooperation will open the door for Apple to enter the huge China market,” says Sherrie Huang, an analyst at Ovum. “It also gives China Unicom a competitive weapon in the high-value subscriber segment.”

Unicom’s iPhone coup is another setback in China Mobile’s increasingly uncomfortable entry into the 3G race. The market leader is already handicapped by its obligation to commercialise TD-SCDMA, the country’s homegrown 3G standard. China Telecom and Unicom operate the CDMA-2000 and WCDMA technology respectively, both more widely accepted (and seemingly more stable) foreign standards.

But don’t count on the iPhone to be a game-changer in China, some critics are warning.

There are already an estimated 2 million unlocked (but unauthorised) grey import iPhones in the marketplace, for instance. And that is not including all the Shanzhai fakes (like “HiPhone” and “Orange”) now in circulation.

Moreover, China’s iPhone will most likely be offered without Wi-Fi capability, as Beijing has not yet approved handsets with this feature.

Meanwhile, China Telecom, the third of the telecoms troika, is trying to lure subscribers to its own 3G network by offering cheap handsets.

According to the China Daily, the operator has placed an order for 4 million 3G handsets with domestic manufacturers. Future sales growth is likely to be strongest in the price-sensitive, more rural segment, so it wants to sell some handsets in the Rmb500-1000 range.

Having passed on the iPhone opportunity, China Mobile has opted to launch a look-alike instead.

So it is introducing the oPhone, a Lenovo smartphone that runs Google’s Android source code.

According to industry sources, there will be a subsidy on offer of up to Rmb2,000 for each unit sold, almost half the price of the device.

A little desperate? Maybe. China Mobile has been struggling to attract subscribers to its 3G network. So far, 959,000 subscribers have signed up for 3G, against a target of three million by the end of this year (see WiC26).

To go with the new oPhone, the telecom giant is also launching an online shop with applications similar to those on Apple’s iTunes Store.

At the store – Mobile Market – users can download mobile phone application software, including games, themes, music and videos. Customers pay for what they download directly through their mobile phone bills.

Mobile Market supports various handsets, including Nokia and Motorola. But not, of course, the iPhone.

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