Posted by: Bruce Einhorn on August 26, 2010
Apple’s in a bind in China. It has teamed up with China Unicom, the perennial also-ran in the country. Unicom has exclusive rights to the iPhone in the world’s biggest cellular market, but it wasn’t Apple’s first choice for a Chinese partner. The American company conducted long on-again, off-again talks with the powerhouse player, China Mobile. Those negotiations went nowhere. As the dominant carrier (with 554 million subscribers by the middle of this year) China Mobile is no AT&T and wasn’t about to agree to give Apple the kind of sweet deal that more desperate carriers gave Steve Jobs. So China Mobile went its own way, launching a bunch of Android smartphones, and Apple was left with a new challenge: Could the iPhone magic work at longtime doormat Unicom?
On Thursday, we got our answer. Unicom reported a 54 percent drop in profit for the second quarter, earning $205 million. “Terrible numbers,” HSBC analyst Tucker Grinnan told Bloomberg News. One big problem: Unicom suffered from high marketing costs to attract customers to the iPhone. Apple’s smartphone is popular with Chinese users - but many of them buy their iPhones on the gray market rather than from Unicom. Unicom sold 500,000 iPhones in the first half of 2010, and Chinese bought another 400,000 on the gray market, according to Beijing-based market research firm BDA China.
China Mobile, meanwhile, earlier this month reported a better-than-expected 6.8 percent increase in profit for the quarter, earning $4.7 billion. Who needs Apple? Not China Mobile.