No iPhone Boost for Apple's Chinese Partner

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.


Reader Comments

Steven

August 26, 2010 11:58 PM

As I said when China Unicom reached the deal with Apple: Apple does not have a big market in China.

China Unicom was a victim of US companies from the beginning. It was hurt by CDMA system venders from US before (that's political deal between China and US), now it is hurt again.

China Mobile is way better.

Christian

August 27, 2010 1:33 AM

China Unicom has "exclusive rights to the iPhone."

Perhaps you'd like to back that up with facts?

Of course you cannot, because the facts are that China Unicom does NOT have exclusive iPhone rights in China.

Or to quote Apple specifically,""(we) can confirm it is not an exclusive deal."

You're supposed to be a journalist, right?

BTW, the lead? "Apple's in a bind in China." You blew that as well. After reading your "story" (emphasis on STORY), you may notice that it's China Unicom that's in the "bind", not Apple.

I have to assume this is a hit piece, because no actual professional could be this stupid.

Get your act together or go find another profession.

Huu-Chi TON

August 27, 2010 6:08 AM

I wholly agree, iphone is for Apple's fans. I don't have it either , i prefer Sony's products.

Husin O'Bama

August 27, 2010 9:25 AM

Who would want to pay thru' the nose for Iphone when Ophone may be just as good.

jOE LIU

August 27, 2010 9:56 AM

Apple store in China sales iPhone for YMB1000 cheaper than China Unicom.

Christian

August 27, 2010 11:43 AM

As I told you last night, Unicom does not have exclusive iPhone rights in China.

Too bad you don't have the sac to admit your mistake.

Or maybe you just don't have the Google? Or a phone... to call Apple and ask. But hey, that'd require, like actual journalism— which is clearly different from what it is you do.

loranzo

August 27, 2010 11:57 AM

Who has more money, Apple! Not China Mobile

Haroon Rashid

August 27, 2010 1:28 PM

What is the lesson to be learnt? China Mobile went on its way launching a bunch of Android smartphones, and Apple was left with a new challenge. Apple should learn its lesson from Google Android OS. Google may some day surpass Apple, as its growth pattern indicates. China Mobile first entry into international market in the region is also moving to Android, as Apple has not officially launched iPhone with China Mobile. China Mobile will bring its product means Android in the territory with 180 population. Apple has tremendous potential, but it should learn from Google.

Apple Iphone Wholesale

August 27, 2010 7:57 PM

Apple has no plans to release a version of the iPhone without a service contract or one that is unlocked. Apple Iphone Wholesale

Steven Patterson

August 27, 2010 10:12 PM

This paves the way for an Australian company Smarttran Holding to provide its unique mobile applications/ Platform.

Exciting times ahead for the still small Australian company if it was to sign with the telco giant.

Mike, San Diego, Ca

August 28, 2010 4:09 AM


What a amateur article. Of course they are
paying for high marketing costs for the iphone, that's part of the deal with the iphone, you pay Apple upfront for each iphone sold and the benefit comes later when subscribers pay their monthly fees.

ATT has had the same high marketing costs, but I don't think they would trade not having those subscribers for lower marketing costs.

Alice

August 28, 2010 6:28 PM

The iPhone will likely have more users in China than the rest of the world combined. At www.MutualMobile.com we have already started locasing many iPhone apps for client to Mandarin.

bilal

September 1, 2010 10:29 PM

american media is dying to boost apple myth. despite their bad wireless connectivity and worst bluetooth connectivity. but for how long?

android is good but motorola and samsung are learning from it and not gonna rely on it.

EOS 20D camcorder battery

September 5, 2010 11:42 PM

Apple should apprentice its assignment from Google Android OS. Google may some day beat Apple, as its advance arrangement indicates. China Mobile aboriginal access into all-embracing bazaar in the arena is additionally affective to Android, as Apple has not clearly launched iPhone with China Mobile.

Andrew

September 18, 2010 10:25 PM

First of all, this isn't an article it is an opinion piece. Second, this author right away commits one fallacy of logic and reason, confuses cause and effect. Bruce, maybe the cause for drop in profits is Unicom's poor marketing skills, poor connection/service. I live in China and most people I talk with hate Unicom, and not because of the iPhone. Granted out of 1.3 billion I have only access to .3billion. HA! Get with it. This opinion piece just seems like another attack against the bandwagoning against Apple that is popular today.

Post a comment

 

About

Bloomberg Businessweek’s team of Asia reporters brings you the latest insights on business, politics, technology and culture from some of the world’s biggest and fastest-growing economies.

BW Mall - Sponsored Links

Buy a link now!