China Mobile Says Door Remains Open to Apple Over iPhone

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China Mobile Ltd. (HKSE:0941) has not made any progress in talks with Apple Inc. to sell the iPhone on the mainland when it launches third-generation mobile services, but will continue to pursue an agreement, chief executive Wang Jianzhou said at the China Development Forum on March 21.



Wang said the door remains open to Apple provided there is mutual benefit – signaling that China’s dominant carrier considers Apple’s terms to be one-sided.



Apart from device sales, Apple controls the sale of authorized applications for the iPhone, while its telecom partner typically shares revenue from fees tied to iPhone usage under long-term user contracts. According to industry analysts who track Apple developments, China Mobile is leveraging its dominant market position by seeking to control the iPhone application store for China.

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But people familiar with the negotiations told Caijing that differences over the application store are just one of the issues in dispute, and may no longer even be the key issue. Rather, they said, China Mobile wants to make the iPhone a key marketing tool for the rollout of its unproven third-generation mobile platform, the homegrown TD-SCDMA, which has not been optimized for the Apple device. Defects in highly-touted devices routinely produce PR disasters for Apple, but it might view a China iPhone launch plagued by technical snags an unacceptable risk.



The industry restructuring of 2008 may have saddled China Mobile with a disadvantage in landing the iPhone. Chinese regulators wanted TD-SCDMA to gain the widest distribution and assigned the dominant carrier to roll out the Chinese-developed 3G technology.

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Meanwhile, rivals China Unicom and China Telecom got a leg up by winning licenses to proven 3G technologies. Unicom will provide 3G services under the WCDMA technology developed by Qualcomm of the US, while China Telecom will launch a CDMA2000-based service, developed in Europe.



Unicom said it is also in talks to become Apple’s China partner for the iPhone, and according to a March 20 Shanghai Morning Post report may have already signed an agreement with Apple, awaiting only higher-level approval to announce the deal.



Unicom chairman Chang Xiaobing confirmed on March 5 that the company is in talks with Apple to provide devices for its 3G service. The company plans to launch commercial testing of its 3G network in pilot cities beginning in the third quarter, with a product launch possible by the end of 2009.