Apple iPhone talks with Chinese carriers gone rocky - reports

[AppleInsider]

Multiple reports this week are suggesting that iPhone talks between Apple and China's two most popular wireless carriers -- China Mobile and China Unicom -- have failed as a result of revenue sharing disputes. China Mobile, however, denies the claim.

The demands by Apple that it receive a percentage of the wireless service revenues generated by would-be users of a localized version of the touch-screen handset have unsurprisingly been met with opposition from both Far Eastern providers.

"Previously, the company intended to cooperate with China Unicom, China's second largest mobile telecoms carrier, but the talks quitted due to the divarication on the sharing proportion of the proceeds," Trading Markets said on Tuesday.

That report was followed Friday by a similar one from the Chinese-language Southern Daily, which stated that negotiations between Apple and China Mobile, China's largest mobile phone operator by subscribers, had failed. The two parties couldn't reach an agreement because of differences over revenue sharing, the paper said.

For its part, however, China Mobile has denied the latest claim, insisting, according to Bloomberg, that it is still in discussions with Apple to offer the iPhone to Chinese consumers sometime in 2008.

Telecom executives familiar with the discussions between the iPhone maker and China Mobile had said earlier in the month that a number of contingencies on Apple's part were likely to prolong the process.

Specifically, there's a precedent among Chinese telecom operators that they do not, under any circumstances, agree to share their revenues with outside parties, as Apple has requested (and achieved) from all of its iPhone partners thus far.

"[O]ur business model does not entail sharing revenue with terminal producers -- we don't share revenue. That's a Chinese rule," one executive told Reuters on condition of anonymity. "All it is right now, on the iPhone and Apple, is that the firm welcomes their approach."

Apple stated earlier this year that it hoped to launch iPhone in Asia during the 2008 calendar year.

[ View this article at AppleInsider.com ]

[SpamSandwich]

Frankly, Apple would be smarter to partner in China. In other words, buy their way in. With their cash on hand, they could make some smart investments that would pay huge dividends down the road. China is not the easiest market to enter, and for an 'arrogant' company like Apple, I'd bet the problems are much worse.

[studiomusic]

Originally Posted by AppleInsider

Specifically, there's a precedent among Chinese telecom operators that they do not, under any circumstances, agree to share their revenues with outside parties, as Apple has requested (and achieved) from all of its iPhone partners thus far.

"[O]ur business model does not entail sharing revenue with terminal producers -- we don't share revenue. That's a Chinese rule,"

Talk about arrogant...
One of the first rules in business, be flexible (both parties involved!).
It should be fun to see who dictates what to whom here.

[SpamSandwich]

Originally Posted by studiomusic

Talk about arrogant...
One of the first rules in business, be flexible (both parties involved!).
It should be fun to see who dictates what to whom here.

The Chinese don't care a whit if Apple enters China or not.

[shamino]

Hey, if the Chinese telcos don't want to share profits, that's fine. It just means Apple will have to make their money entirely from the cost for the handset. So they'll all end up costing the equivalent of $1000 (just like the unlocked iPhones in Europe.)

[Gizmo-xl]

Originally Posted by shamino

Hey, if the Chinese telcos don't want to share profits, that's fine. It just means Apple will have to make their money entirely from the cost for the handset. So they'll all end up costing the equivalent of $1000 (just like the unlocked iPhones in Europe.)

I completely agree with your comment. No need to fight it out.....

[Foo2]

Originally Posted by SpamSandwich

The Chinese don't care a whit if Apple enters China or not.

Heh, yeah, not when they can clone the hardware, copy the software, and their government is too conflicted and corrupt to prosecute! I'm sure talks are continuing, so China Mobile has time to bribe more government officials and Meizu can finish up the clones.

[Bageljoey]

Originally Posted by shamino

Hey, if the Chinese telcos don't want to share profits, that's fine. It just means Apple will have to make their money entirely from the cost for the handset. So they'll all end up costing the equivalent of $1000 (just like the unlocked iPhones in Europe.)

Sure, but that doesn't work with consumers. People in general do not "see" or "feel" monthly payments like they do initial purchace payments. In the US, if people had to pay the whole amount Apple gets over the life of a 2 year contract to Apple in a lump sum they would not do it--even if the monthly payments were lower and it all worked out the same in the end.

I assume Chinese consumers are similar to American ones in this respect.
Besides, I always assumed the $1000 unlocked phones in Europe were more for regulatory reasons--are many people going to buy those?

[palegolas]

I think it's good that China says no to revenue sharing. Obviously it's not allowed by chinese law, and I think it's pretty harsh by Apple to go down this line to begin with. They're making money like SICK on these deals... so sick they should give away iPhones for free. It's crazy that they really pulled it off. It shows us where Apple stands today, amazing. But Apple is getting too cocky for its own good I think. It might hit back soon if they don't soften up and care about "the crazy ones" again. Now that an unlocked iPhone costs more than a MacBook it kind of sets things in perspective. I think Apple is getting to the point where they are starting to misuse their position.

[JeffDM]

Originally Posted by studiomusic

Talk about arrogant...
One of the first rules in business, be flexible (both parties involved!).
It should be fun to see who dictates what to whom here.

I've never really heard of Apple being flexible in their business dealings.

[nagromme]

I read that the Chinese firms are demanding higher levels of lead, benzene, and arsenic. Apple doesn't want to produce a special iPhone just for China. It's a catch-22.

Originally Posted by JeffDM

I've never really heard of Apple being flexible in their business dealings.

They're flexible all the time. Look at iTunes: songs have DRM Apple doesn't want, as a compromise with the RIAA. (No, DRM isn't there to sell iPods: most music on iPods is DRM-free, from CD.)

[fraklinc]

Originally Posted by Foo2

Heh, yeah, not when they can clone the hardware, copy the software, and their government is too conflicted and corrupt to prosecute! I'm sure talks are continuing, so China Mobile has time to bribe more government officials and Meizu can finish up the clones.

Meizu has nothing but a photoshop iPhone pic and a piece of paper with ideas how to make a iPhone better, nothing Else.

[JeffDM]

Originally Posted by nagromme

They're flexible all the time. Look at iTunes: songs have DRM Apple doesn't want, as a compromise with the RIAA. (No, DRM isn't there to sell iPods: most music on iPods is DRM-free, from CD.)

All the time? One example breaks "never" but that's only one example that doesn't make a case for "all the time".

[HarveyCK]

Originally Posted by AppleInsider

Telecom executives familiar with the discussions between the iPhone maker and China Mobile had said earlier in the month that a number of contingencies on Apple's part were likely to prolong the process.

Specifically, there's a precedent among Chinese telecom operators that they do not, under any circumstances, agree to share their revenues with outside parties, as Apple has requested (and achieved) from all of its iPhone partners thus far.

Let's not forget the other looming precedent...That China Mobile is a member of the OHA! This will certainly have an impact on financial agreements.

http://www.openhandsetalliance.com/oha_members.html


Cory

[shamino]

Originally Posted by Bageljoey

Sure, but that doesn't work with consumers. People in general do not "see" or "feel" monthly payments like they do initial purchace payments. In the US, if people had to pay the whole amount Apple gets over the life of a 2 year contract to Apple in a lump sum they would not do it--even if the monthly payments were lower and it all worked out the same in the end.

I assume Chinese consumers are similar to American ones in this respect.
Besides, I always assumed the $1000 unlocked phones in Europe were more for regulatory reasons--are many people going to buy those?

If the people balk at the price, then the carriers won't sell many phones. I think customer demand (especially as more of the Chinese see the rest of the world using iPhones) will apply enough back-pressure that either the carriers will back down or the consumers will start saving up to be able to buy the device (resulting in future sales, but nothing short-term.)

And I wouldn't assume Chinese customers to be the same as Americans. Asians in general seem to take a much more long-term view of the world. I would expect a larger percentage of them to be willing to save up for an expensive item. They might even prefer it over a low up-front cost plus higher monthly payments.

[studiomusic]

Originally Posted by JeffDM

All the time? One example breaks "never" but that's only one example that doesn't make a case for "all the time".

Selling iphones unlocked in France without a lawsuit, $100 back to early adopters of the iphone... more?

[josechus]

Originally Posted by SpamSandwich

The Chinese don't care a whit if Apple enters China or not.

yeah that's right! It'll be better if Apple launches iPhone first in Japan and Taiwan. Rather than ChinaPRC. The chinese doesn't even care about Apple.

[smokeonit]

if china wants to stay in the WTO the should tone down their tone..

"under no circumstances"... sounds very snobby to me... also how chinese joint-ventures exploit their foreign counterparts is a slap in the face of every honest and hard trying business partner in china...

i hope the WTO does it's job of making it clear to the commies that this will not be tolerated...

apples pratices are not the issue here... that's a take it or leave it approach... the iphone gets people to those providers they didn't have before... if the chinese are so stupid to pass on that that's their problem... so far every apple GSM partner has been more than happy with the iphones reception... i haven't heard one rumuor that any cell exectuvie is unhappy with the iphone sales, not in the US, not in germany, not in the UK... next is france and switzerland and austria...

[drjjones]

Originally Posted by SpamSandwich

The Chinese don't care a whit if Apple enters China or not.

WRONGBoy are u misinformed .

[smokeonit]

Originally Posted by studiomusic

Selling iphones unlocked in France without a lawsuit, $100 back to early adopters of the iphone... more?

the unlocked iphones in france and germany are much more expensive than the locked ones...

and the other GSM providers don't have the EDGE coverage nor the visual voicemail infrastructure in place to accommodate the iphones owners!

[drjjones]

Originally Posted by shamino

Hey, if the Chinese telcos don't want to share profits, that's fine. It just means Apple will have to make their money entirely from the cost for the handset. So they'll all end up costing the equivalent of $1000 (just like the unlocked iPhones in Europe.)

Exactly

[drjjones]

Originally Posted by Bageljoey

Sure, but that doesn't work with consumers. People in general do not "see" or "feel" monthly payments like they do initial purchace payments. In the US, if people had to pay the whole amount Apple gets over the life of a 2 year contract to Apple in a lump sum they would not do it--even if the monthly payments were lower and it all worked out the same in the end.

I assume Chinese consumers are similar to American ones in this respect.
Besides, I always assumed the $1000 unlocked phones in Europe were more for regulatory reasons--are many people going to buy those?

The rich will buy anything. The rest will buy when they need or want it bad enough like everyone else

[smokeonit]

Originally Posted by drjjones

WRONGBoy are u misinformed .

i agree, the chinese that have the $$$/€€€ do care about apple... it's just apple has been slow to get into the chinese market and a lot of macs are grey imports...

apple stores and a chinese apple online store and iTS would be well received...

beijing and shanghai apple dealers but their not apple owned, in my opinion a mistake... aple should cater to the new computer generation ASAP!

[smokeonit]

Originally Posted by drjjones

The rich will buy anything. The rest will buy when they need or want it bad enough like everyone else

in germany unlocked iphones are €999, that roughly $1480 @ the current exchange rate... but that price was made by t-mobile, not apple!

i think a fair unlocked price is around €700.... the €1000 is a reaction to vodafone sueing t-mobile for access to iphones!

and debitel, an airtime reseller in the german cell market, offers a €600 rebate for anyone wanting the iphone with their contract... but that's with a 24 months contract...

[smokeonit]

Originally Posted by Bageljoey

Sure, but that doesn't work with consumers. People in general do not "see" or "feel" monthly payments like they do initial purchace payments. In the US, if people had to pay the whole amount Apple gets over the life of a 2 year contract to Apple in a lump sum they would not do it--even if the monthly payments were lower and it all worked out the same in the end.

I assume Chinese consumers are similar to American ones in this respect.
Besides, I always assumed the $1000 unlocked phones in Europe were more for regulatory reasons--are many people going to buy those?

spiegel.de made a calculation with the locked and unlocked prices...

and if you get a similar contract, but without the EDGE and wifi flat rate t-mobile offers, you save over 24 months, but if you want to use the iphone as intended, with daily heavy internet use, then you really need the t-mobile contract! wifi hotspots from t-mobile are pretty common in public places like bars and restaurants and hotels in germany, as in most airports and train station, and some ICE high speed trains of t-mobile wifi coverage, serviced by up to 6 HSDPA/HUSPA links... i think the t-mobile wifi flatrate itself is worth €20 a month, and without it you will end up paying €20 a day if you connect to them...

i got that t-mobile flat rate on my t-home ADSL2+ account for €15/month, and i use it at least 2h a day....

[drjjones]

Originally Posted by smokeonit

in germany unlocked iphones are €999, that roughly $1480 @ the current exchange rate... but that price was made by t-mobile, not apple!

i think a fair unlocked price is around €700.... the €1000 is a reaction to vodafone sueing t-mobile for access to iphones!

and debitel, an airtime reseller in the german cell market, offers a €600 rebate for anyone wanting the iphone with their contract... but that's with a 24 months contract...

I'm glad so many of the comments show the viewers have a brain. The site is helpful amd infomative . Thank you Kasper
.

[Bageljoey]

Originally Posted by shamino

And I wouldn't assume Chinese customers to be the same as Americans. Asians in general seem to take a much more long-term view of the world. I would expect a larger percentage of them to be willing to save up for an expensive item. They might even prefer it over a low up-front cost plus higher monthly payments.

Y'know, as I was writing it I was going to say something about "human nature" and I decided I might be pushing it so I changed it to "I assume that." I readily agree that could be a misguided assumption.

But still. $1000 for a phone? It is amazing to me that Apple has us agreeing that this is a "fair price" for just the phone!!!

Here in the USA, some of that money is being beat out of at&t--as a consumer you pay the cost of the phone up front and the monthly fees are reasonable compared to what you would pay for similar service and high data usage with any phone. That money that Apple gets doesn't seem like it is coming out of our pockets.
If you buy an unlocked phone for $1000 or anything like it and then have to pay the service provider full price on top of it--Damn--I just don't get it for anyone but the people who have so much money they don't know what to do with it!!
[Edit: unless you can get a deal like that Debitel one--I haven't looked into that much because it doesn't apply to me]

[nagromme]

Originally Posted by Bageljoey

But still. $1000 for a phone? It is amazing to me that Apple has us agreeing that this is a "fair price" for just the phone!!!

Don't forget that other smartphones with smaller screens and less storage have recently sold unlocked for over $1000. The Nokia N95 was selling for $800, and even higher before that I believe. Expensive phones aren't an Apple invention

[smokeonit]

but street price should be %30 below those figures....

[shamino]

Originally Posted by Bageljoey

But still. $1000 for a phone? It is amazing to me that Apple has us agreeing that this is a "fair price" for just the phone!!!

I wish everybody would read my posts on other threads, so I don't have to repeat myself all over the place.

Apple is not forcing people to pay $1000 for an iPhone. Their European price is €400 (about $590). The $1000 number being tossed about is to buy an unlocked version.

Unlocked phones always cost a lot more than locked versions. Go to web sites for major US carriers, like AT&T and Verizon and look up the prices for locked smartphones with contracts. Now Google for unlocked versions of the same phones. You'll find that they cost 125-350% more than the locked version. The reason they cost less than the unlocked iPhone is simply due to the fact that the locked versions also cost a lot less. (Locked smartphones typically sell for $150-250, vs. $400 for the iPhone.)

If you apply these percentages to the iPhone's locked European price, you get an expected price of €900-1800 (about $1300-2600). Given the fact that they are actually selling for €750 (about $1100) in France and €1000 (about $1500) in Germany, that tells me that it's not nearly as bad a deal as your gut-feeling reaction would say.

Now, it is perfectly fine to argue that the iPhone's €400 base price is too high, or that all manufacturers are gouging customers with huge markups for unlocked phones, but that's a much broader subject, and is one that nobody here has enough information to intelligently argue.

[smokeonit]

shmaino is right...

and the prices in europe are more or less 1:1 $ to €... not in conversion, but how real prices are when you go out to buy something...

the $1.50 for €1.00 is just whats going on right now interms of exchange rates...

$399 and €399 are fair prices in terms of markets...

a macdonalds menu is around €4.50 to €5 in germany...

a comparable mcdonalds menu is abou the same in the US in $...

and don't forget that US prices are posted without tax! german sales tax is 19%, UK is 16.5% i think, not a 100% sure... the $399 is without state sales tax! that the US sales tax is lower is another thing, varying from 0% to 8.25%... but those taxes are never reflected unless you really get a receipt with the full amount!

[anantksundaram]

The phone-buying model in China and India is somewhat different from that in the US, Europe, Japan etc. People are perfectly happy to plonk down for the full cost of the handset up front (often much lower than in the West, because of numbers sold), and have multiple SIMs from multiple providers. See, e.g.,: http://online.wsj.com/public/article...695607240.html (you do not need a subscription anymore to view wsj.com!).

A contract with one of the service providers might actually be a silly way for Apple to try to enter those two markets.

(I doubt, however, that handsets costing more than $750 or so will sell in those markets, except as a super-rich niche product).

[vinney57]

Originally Posted by JeffDM

I've never really heard of Apple being flexible in their business dealings.

Let us praise the Lord for that.

[vinney57]

Originally Posted by anantksundaram

(I doubt, however, that handsets costing more than $750 or so will sell in those markets, except as a super-rich niche product).

A niche product in China is a massive market by any other country's standards.

[SpamSandwich]

Originally Posted by drjjones

WRONGBoy are u misinformed .

No, I've been there.

[TenoBell]

Those of you who think China would not care about the iPhone missed this thread.



In one Chinese netizen's words: "It's like the whole country has gone iPhone, all my friends have become iPhoners." The iPhone is readily available in computer superstores in most large Chinese cities.

China's New 'Love Craze' — Black Market iPhones

[BallmerSteve]

Apple is coming, they make the Chinese govt look like ametuers!

[josechus]

But maybe Japan and Taiwan will be a better choice. Macs in Japan has about 50% of marketshare. and, I heard that most of the chinese companies which earns a lot of $$ are all Taiwanese. Even the biggest company of tecnology in ChinaPRC are from TaiwanROC. Remember, iPhone is mounted by a Taiwanese company.

The Chinese doesn't care if they have an "REAL" iPhone!~

[lfmorrison]

Originally Posted by smokeonit

the unlocked iphones in france and germany are much more expensive than the locked ones...

It seems to me that is should be obvious by now that Apple's estimation of the "full" price* of the locked-in phone actually includes the subsidies brought in by the revenue-sharing dollars coming in from Apple's partners. In situations where there is no revenue-sharing (ie, contract-free, SIM-unlocked phones), the subsidy is gone, so the difference is recovered by charging the true full price they expected to realize from the phone in one up-front charge. That seems perfectly reasonable to me.

*(That's the price -- the income they expect to bring as a result of selling the phone. Not the cost -- the expenses they have to cover when manufacturing the phone)

and the other GSM providers don't have the EDGE coverage nor the visual voicemail infrastructure in place to accommodate the iphones owners!

Lacklustre EDGE coverage, at least, cannot possibly be construed in any way as being Apple's fault.

Depending on the technical details behind the Visual Voicemail delivery mechanism (I don't know about the state of any patents and whatnot that might impede its acceptance) it's entirely possible that Apple doesn't have any say in the timetable for other carriers introducing that feature either.

[addabox]

Originally Posted by palegolas

I think it's good that China says no to revenue sharing. Obviously it's not allowed by chinese law, and I think it's pretty harsh by Apple to go down this line to begin with. They're making money like SICK on these deals... so sick they should give away iPhones for free. It's crazy that they really pulled it off. It shows us where Apple stands today, amazing. But Apple is getting too cocky for its own good I think. It might hit back soon if they don't soften up and care about "the crazy ones" again. Now that an unlocked iPhone costs more than a MacBook it kind of sets things in perspective. I think Apple is getting to the point where they are starting to misuse their position.

I see this as an example of the increasingly common "Apple is wrong so the world must be crazy" line of thinking.

That is, Apple keeps selling lots of stuff at prices some parties find excessive, and since the answer can't be "Apple is charging what people are willing to pay", then it must be the result of some kind of mass psychosis, or the RDF, or, in the case of the deals Apple has made with cell carriers, some kind of shake-down.

Presumably Jobs threatened those companies with physical harm if they didn't agree to his insane, money grubbing terms, and at some point, when the powerful drugs wear off, they'll all realize that the iPhone sucks and they got played as fools.

As will the people buying iPhones, who are, apparently, largely stupid rich people, fan boys, clueless trend chasers, the easily duped, the easily hypnotized, and hapless newbies, who don't understand that they can buy other phones that do more for less. It's just a shame there are so many of them.

Oh, and, of course, loyal Apple customers that are required to buy the iPhone at whatever price Apple cares to charge, and will hate every minute of their Apple using life from now on.

Damn you, Apple, your sinister web of mind control must be broken.