Conflicting reports on China Unicom 3-year iPhone deal

[AppleInsider]

A Shanghai newspaper reports Apple has reached a three year exclusive agreement with China Unicom to market the iPhone, though company officials say a deal is not yet official.

Shanghai Securities News cited unnamed sources in announcing the alleged deal. But after the news broke, Dow Jones Newswires reported that China Unicom spokesperson Sophia Tso has officially said her company and Apple are still in discussions and have not reached an agreement.

The deal reportedly set a minimum threshold of CNY 5 billion ($731 million) in iPhone sales, guaranteeing orders of one to two million devices per year. The source said China Unicom could begin selling the iPhone as early as late September.

Other possible details, as relayed by Fortune Brainstorm Tech: China Unicom will pay Apple 3,000 CNY ($439) per unit and price it below that for customers, Unicom promises to sell a minimum 1 million units per year, and the Chinese iPhone will access "Apple's China App Store."

In February, China Unicom was fingered as Apple's most likely partner by British consulting firm Ovum, followed by a leak of iPhone information inadvertently posted by China Unicom's website and an admission by the company that it was in talks with Apple in March. Earlier this month, Analyst Shaw Wu of Kaufman Bros. similarly claimed that China Unicom would be the frontrunner in marketing Apple's phone in the country.

With over 135 million subscribers as of February 2009, China Unicom is 170% larger in terms of users than AT&T in the US, but it is still China's second largest mobile carrier after the state-owned giant China Mobile, which boasts 471 million subscribers, making it the world's largest carrier by number of subscribers.

The vast size of the Chinese market has kept observers intently interested in how and when Apple would officially enter the market with the iPhone. At its recent earnings call, Apple executives only said they planned to begin selling the iPhone within the next year and described the negotiations as a "priority project." That may have been cover to keep its negotiations productive as Apple pitted the Chinese carriers against each other to gain the best deal.

China Unicom was considered the initial favorite because the company runs a standard GSM/UMTS 3G mobile network using the same signaling technology at AT&T in the US and most other carriers worldwide. In contrast, China Mobile primarily operates a TD-SCDMA network based on Chinese technology developed to avoid paying royalties to Western nations.

In order to deliver the iPhone to China Mobile's subscribers, Apple would have to develop new hardware and software to support the unique system, the same problem facing Verizon Wireless and Sprint in the US, both of which use Qualcomm's CDMA/EVDO; existing iPhone models are already compatible with China Unicom's network. Wu estimated that 1-1.5 million grey market iPhones have already made their way into China.

In addition to phone network compatibility, China Unicom may be more open to allowing Apple to run its own software store and retain control over iPhone features such as WiFi and Bluetooth. In contrast, China Mobile has expressed an unwavering demand to exclusively operate its own mobile software store, a stance also adopted by Verizon in the US.

[ View this article at AppleInsider.com ]

[SGSStateStudent]

Finally! After such a long time of arguing.

[em_te]

China Mobile also uses GSM, but they do not support 3G. Edge is supported however.

[AjitMD]

China like India has always been a difficult place to make money for Western companies. They haggle to death and them may not honor the terms. Unicom will also be pushing the Google phones and anything else they can peddle. Knock-offs may take off since Apple created a supply chain in China and other places in its quest for outsourcing its way to boost short term goals.

Still will be an incremental money maker. Unicom is hungry to gain market share. Its UMTS/WCDMA network tech is much more mature than China Mobile TD-SCDMA which is not stable yet. BTW, TD-SCDMA tech is nothing but a poor pillaged copy of US CDMA tech done to avoid paying royalties to QCOM.

Anybody who done business with Chinese companies will appreciate the haggling that goes on... it is slow and they try to wear the other party out. Then after any agreement is signed, it just means some more haggling and rip-offs.

APPL stock now has a PE close to 20 and the enterprise PE is probably 20% less. What we need is for the Tablet PC to be a success right here in USA.

[Constable Odo]

This China Unicom deal on, deal off stuff is becoming very annoying. One doesn't know what to believe anymore when reading an internet article. I'm wondering if it's just over-enthusiastic journalism or intentional FUD. I was all excited about a deal taking place and now find out it's just a lie. It's my fault. I should just wait until Apple makes an announcement before spreading false information.

[Wiggin]

Originally Posted by AppleInsider

With over 135 million subscribers as of February 2009, China Unicom is 170% larger in terms of users than AT&T

170% larger means they are 2.7 times the size of ATT. I believe you meant they are 70% larger. 170% larger would be 215 million...a pretty significant difference.

I don't normally nit-pick grammar, but this is messing up the math. And that I won't stand for!

[AjitMD]

Originally Posted by Wiggin

170% larger means they are 2.7 times the size of ATT. I believe you meant they are 70% larger. 170% larger would be 215 million...a pretty significant difference.

I don't normally nit-pick grammar, but this is messing up the math. And that I won't stand for!

Plus the China Unicom customers are low end compared to China Mobile. More important, they are way low end on the average than VZ which is very hi end on global terms. Nothing beat the US consumer worldwide. Besides nobody Bubba and Jane 6Pack when it comes to spending on consumer items. Apple needs to focus on Verizon... the carrier realizes it was a mistake to turn Apple down and would play "nice". They are certainly accelerating the deployment of 4G. Regardless Apple will need to incorporate CDMA/EVDO on VZ phone, because the LTE will have a limited footprint.

ATT iPhone hypergrowth will be over soon and it will steady growth. No point staying on the slowing boat. Besides, churn back to VZ from ATT customers will benefit Apple... plus lower data prices due to competition. I am sure Apple has people who took Econ 101 in college, besides just engineers.

[aaarrrgggh]

Might Apple be the first company to really make money selling things in China with a high margin? They are only targetting the top 1-2% of the market there, who can afford an iPhone and service. Looks like a smart move. Hope wifi isn't disabled out of principle.

[cameronj]

Originally Posted by Constable Odo

This China Unicom deal on, deal off stuff is becoming very annoying. One doesn't know what to believe anymore when reading an internet article. I'm wondering if it's just over-enthusiastic journalism or intentional FUD. I was all excited about a deal taking place and now find out it's just a lie. It's my fault. I should just wait until Apple makes an announcement before spreading false information.

If you can't handle the nature of a rumor, one wonders why you are on a rumor site...

[AjitMD]

Originally Posted by aaarrrgggh

Might Apple be the first company to really make money selling things in China with a high margin? They are only targetting the top 1-2% of the market there, who can afford an iPhone and service. Looks like a smart move. Hope wifi isn't disabled out of principle.

In the long term most American companies doing business in China and even India get ripped off. They force US companies to set operations there, including manufacturing, R&D. Not only our technology, manufacturing expertise gets transferred but also technical skills. Talk about selling the rope that hangs us. Usually the JV partners rip the US companies via crooked front running land deals, cuts from suppliers, book keeping, etc. The graft and corruption makes Louisiana look like a heaven.

Look what they did to Rio from Australia... the Chinese wanted lower price for the iron ores. Rio balked so, they arrested 4 of the executives and threw them in their dungeons on espionage charge... 4 days after negotiations collapsed. I know one exec of a mining company... the way they sell their ore is only via a secure letter of credit of a US bank and FOB only... or cash and carry. This particular exec is Chinese and speaks the lingo, but refused to set foot in China... because of the risk of being "Shanghaied".

No doubt our trading "partners" are playing hardball. Even the EU. They could not beat the US in technology... so they just fine our companies like Intel, MSFT, etc Billions... and even harass AAPL. No support from our pandering government.

[anakin1992]

Originally Posted by AjitMD

In the long term most American companies doing business in China and even India get ripped off. They force US companies to set operations there, including manufacturing, R&D. Not only our technology, manufacturing expertise gets transferred but also technical skills. Talk about selling the rope that hangs us. Usually the JV partners rip the US companies via crooked front running land deals, cuts from suppliers, book keeping, etc. The graft and corruption makes Louisiana look like a heaven.

i think you don't know what you are talking about about business in china. maybe you are right in india cases. in china, US companies have made zillions of money over there. GM is profit, Pizza Hut is profit, KFC is profit, Coca Cola is profit, GE is profit, etc. in old days, EU and US telecomm sold billions of dollars PBX equipments over there. as to land deal, china government provides buildings/land etc to any foreign companies upto certain size. there is not much crooked operation so much to those foreign companies. i do know many local companies want to take the benefits applicable to those foreign companies, so they setup the oversea operation first and try to come to china for those special treatments. and these local companies did make lots of money on the lands allocated only for commercial development by selling them.

Look what they did to Rio from Australia... the Chinese wanted lower price for the iron ores. Rio balked so, they arrested 4 of the executives and threw them in their dungeons on espionage charge... 4 days after negotiations collapsed. I know one exec of a mining company... the way they sell their ore is only via a secure letter of credit of a US bank and FOB only... or cash and carry. This particular exec is Chinese and speaks the lingo, but refused to set foot in China... because of the risk of being "Shanghaied".

do you know anything more about rio case than what those stupid media told you? rio bypassed chinese government to deal with chinese local companies. this is direct against the rule by government. doing so will jack up the price officially set by government, so those local companies would resell those ore in chinese domestic market. i don't think any government would tolerate the practices via bribing by rio chinese branch. let me give you an example: rio can sell ore to a chinese company A for price of $4 dollars. but via official channel, Rio asks for $8 the long term price from chinese government. the difference is $4. if chinese government takes $8 for long term of 10 years, chinese company A will be able to make $4 by reselling their portion of ore to another chinese company. most of steel companies who need ores in china are state-owned, so the eventually money comes out of chinese people. what china is doing is to try to stop this, then australian cry for foul. this is about $500Billions business, not $5billion or million.

it is very easy to jump onto some bandwagon to have some easy shots on some topic. but if you dip more, things are not what those media reports want to tell you.

[AjitMD]

Originally Posted by anakin1992

i think you don't know what you are talking about about business in china. maybe you are right in india cases. in china, US companies have made zillions of money over there. GM is profit, Pizza Hut is profit, KFC is profit, Coca Cola is profit, GE is profit, etc. in old days, EU and US telecomm sold billions of dollars PBX equipments over there. as to land deal, china government provides buildings/land etc to any foreign companies upto certain size. there is not much crooked operation so much to those foreign companies. i do know many local companies want to take the benefits applicable to those foreign companies, so they setup the oversea operation first and try to come to china for those special treatments. and these local companies did make lots of money on the lands allocated only for commercial development by selling them.



do you know anything more about rio case than what those stupid media told you? rio bypassed chinese government to deal with chinese local companies. this is direct against the rule by government. doing so will jack up the price officially set by government, so those local companies would resell those ore in chinese domestic market. i don't think any government would tolerate the practices via bribing by rio chinese branch. let me give you an example: rio can sell ore to a chinese company A for price of $4 dollars. but via official channel, Rio asks for $8 the long term price from chinese government. the difference is $4. if chinese government takes $8 for long term of 10 years, chinese company A will be able to make $4 by reselling their portion of ore to another chinese company. most of steel companies who need ores in china are state-owned, so the eventually money comes out of chinese people. what china is doing is to try to stop this, then australian cry for foul. this is about $500Billions business, not $5billion or million.

it is very easy to jump onto some bandwagon to have some easy shots on some topic. but if you dip more, things are not what those media reports want to tell you.

I am not jumping into a bandwagon of any sort. When US companies like telecom set ventures in China, they transfer capital, technology, and skills. Look how they Chinese have telecom competitors like Hwei that competes with Cisco. Set up shoe companies... guess what? They create knock-offs using the same supply chain. When GM set-up plants there on some other place, they transfer tech to a huge supply chain that foster competitors... Chinese cars are the way. Same for computers. "Supermarkets" for pirated anything from purses, knock-off iPhones, not to mention DVDs, music, etc. They even have organized tours for that. If there is merit to the Rio case, the Chinese need to bring it into the open... no Shanghai the executives into a dungeon 4 days after the negotiations fail. How do I know? My parents and brothers used to live there.

India is the same thing... I can even where to begin. The books of many of these companies are cooked, even JV. US consumer companies set up ventures... and bang, and even before they get going copycats pop up for everything from soft drinks on up. Get tied into courts... it is messy but nothing like China. Just takes time and grease.

[Dr Millmoss]

If these rumors and numbers turn out to be accurate, Apple could add 2-3% onto their annual revenue, and a similar amount to their earnings ($0.15 a share?), by selling iPhones in China. At first it might not sound like much, but earnings growth is an additive process.

[Trajectory]

"Apple's China App Store"

I wonder what in the world they'll be allowed to sell in that App Store.

[SpamSandwich]

Originally Posted by Trajectory

"Apple's China App Store"

I wonder what in the world they'll be allowed to sell in that App Store.

Nothing political, that's for sure.

[samab]

The rumor's details were too specific --- i.e. including the price of what China Unicom would pay per iphone --- which immediately makes the rumor not reliable at all.

[anakin1992]

Originally Posted by AjitMD

I am not jumping into a bandwagon of any sort. When US companies like telecom set ventures in China, they transfer capital, technology, and skills. Look how they Chinese have telecom competitors like Hwei that competes with Cisco. Set up shoe companies... guess what? They create knock-offs using the same supply chain. When GM set-up plants there on some other place, they transfer tech to a huge supply chain that foster competitors... Chinese cars are the way. Same for computers. "Supermarkets" for pirated anything from purses, knock-off iPhones, not to mention DVDs, music, etc. They even have organized tours for that. If there is merit to the Rio case, the Chinese need to bring it into the open... no Shanghai the executives into a dungeon 4 days after the negotiations fail. How do I know? My parents and brothers used to live there.

trade is bi-directional activities. chinese are not stupid. with vast mass of chinese students in US or other countries, it is just matter of the time for china to get to know anything you and i know. so please be open minded about it. competition can only enhance the product and benefit customers. don't fear competition, and i don't think cisco fears the competition from huwai in any sorts. if not, cisco will be very pathetic.

i tried to understand and connect the dots here: you parents and brothers used to live in china, and they have been thrown into dungeon before, therefore rio executives must have been put into dungeon. if so, it makes sense on your allegation.

anyway, let us go back to rio case. over the years, it has been an open secret in china that it is the time to clean up chinese domestic commodity market, rio deserved it if they did not understand it. this shakeup in pending has been well talked for quite a long time. so i am not sure what you want to be open about. last time i checked was that rio chinese branch was still in china, not in australia, so it has to follow every legal rule setup by chinese. and if they have some foul plays, they have to be hold accountable.

India is the same thing... I can even where to begin. The books of many of these companies are cooked, even JV. US consumer companies set up ventures... and bang, and even before they get going copycats pop up for everything from soft drinks on up. Get tied into courts... it is messy but nothing like China. Just takes time and grease.

can you provide a concrete number on how "many" you meant to say? further how many out of the total number of the companies in india? an enron is bad grape, but it does not mean all american companies are crooked. if we keep talking like this, it is not meaningful to go on.

[dreamery]

Typical of how the Chinese do things in China. One says YES and the other says NO. It's called losing face

[SGSStateStudent]

It really has been a long time since the iPhone was supposed to go to China. I guess the Chinese there are happy now.

[SGSStateStudent]

To: Dreamery

Refer to my bottom post.

[SGSStateStudent]

Originally Posted by dreamery

Typical of how the Chinese do things in China. One says YES and the other says NO. It's called losing face

Slightly off topic there. Let's get back to the topic.

Carry on..