Apple 2.0

Covering the business that Steve Jobs built

China Unicom signs iPhone deal

August 28, 2009: 6:21 AM ET

china-iphoneChina Unicom announced Friday that it had struck a deal with Apple (AAPL) to bring the iPhone to the world's largest cellphone market.

The announcement ends months of speculation and represents a coup for China Unicom, the country's No. 2 carrier with more than 140 million subscribers. Apple's negotiations with giant China Mobile (nearly 500 million subscribers) broke down earlier this year.

"We believe China Unicom's high-speed mobile broadband network, coupled with ... (the iPhone) will create new communication and different experiences for customers in China," said Unicom CEO Chang Xiaobin at a news conference.

A brief statement in the press release announcing China Unicom's interim earnings said that a three-year deal agreement with Apple had been reached on Aug. 28 and that the initial launch was expected to occur in the fourth quarter of 2009. No details of pricing or revenue sharing were announced.

But according to earlier reports in the Chinese business press, China Unicom has agreed to buy 5 million iPhones for $1.46 billion.

According to these press reports, Apple is building two different iPhones for the Chinese market.

The first to win approval by the Chinese Ministry of Industry and Information Technology does not receive Wi-Fi signals -- a feature Apple agreed to remove in order to get around Beijing's restrictions on handsets with high-speed Internet capability.

But according to Dan Butterfield, editor of iPhonAsia, a second model has been submitted to China's Telecommunication Tech Labs for testing that is capable of receiving both Wi-Fi and WAPI, a Chinese standard for wireless networks.

The deal announced on Friday represents the biggest prize in Steve Jobs' two year campaign to blanket the world with iPhones.

As of June, Apple had sold 26.4 million iPhones in more than 80 countries.

China has some 700 million mobile customers. Its large and growing middle class has both disposable income and a sophisticated taste for high tech gadgetry. An estimated 1.5 million gray market and counterfeit iPhones have already made their way to China.

Sanford Burnstein's Toni Sacconaghi told the Wall Street Journal earlier this week that he believes Apple will sell 2.9 million iPhones in China by the end of 2011, an estimate that seems low given reports of a 5 million unit pre-sale.

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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