China Unicom is the front runner in the “battle” between China’s two largest cellphone carriers to win exclusive rights to sell Apple’s AAPL iPhone in China, but giant China Mobile is “not out yet.”
So says Kaufman Bros.’ Shaw Wu in a note to clients issued Monday. “We checked in with our industry and supply chain sources,” he writes, “and as expected, details are hard to come by as Apple keeps a tight lid on its future plans, but we were able to gather some data points that Apple followers may find useful.”
- China Unicom is hungrier: “It appears that China Unicom is more willing to provide larger subsidies and cede more control to Apple to grow its subscriber base of 133 million users vs. 488 million at China Mobile.”
- Wireless protocols are key: China Unicom has made it easier for Apple by launching plans to deploy 3G coverage to 284 cities using basically the same UMTS/WCDM technology AT&T uses. China Mobile has gone its own way, with plans to launch 3G service in 238 cities using lower-cost but incompatible TD-SCDMA protocols.
- Apple has several options: It could sell its current iPhones to China Unicom; it could re-introduce the original 2G phones compatible with both carriers’ GSM networks; it could make new multi-baseband phones that work with both carriers’ 3G networks.
- China already has iPhones: 1 to 1.5 million of them, Wu estimates, even without an official carrier. The “official” way to buy one, he hears, is through Hong Kong’s Hutchinson Telecom, which struck a deal with Apple last year.
- China’s business model is different: “From our understanding, customers in China are more willing to pay more for the hardware so the subsidy is likely smaller as well as monthly fees from the service plan. Service plan pricing is much lower than the U.S. In Hong Kong, it is approximately $25 compared to $70 here in the U.S. In China, it is as low as $10 though Internet data plans are fairly new in China.”
China’s 687 million mobile subscribers represent the biggest prize on the planet for cell phone makers — the last missing piece in Steve Jobs’ master plan to blanket the earth with iPhones. According to Wu, cell phone penetration there is 51% — compared with 85% to 95% in developed countries — so there is plenty of room for growth.