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Global Economics

Will China Unicom Fumble its iPhone Launch?

The state-owned Chinese telecom operator will launch sales of the iPhone soon, but skeptics have their doubts in Unicom's abillity to succeed with Apple's smartphone

In the two years since Apple started negotiations with Chinese telecoms operators, 1.5 million iPhones have already arrived, of course.

Nevertheless, the iPhone represents the greatest competitive advantage that China Unicom may ever have against China Mobile, which has three-quarters of the market.

China Mobile, of course, is unable to sell iPhones even if it wanted to because it uses China's proprietary TD-SCDMA coding system for 3G, which requires much larger handsets.

At the moment, the black market iPhones rely on cracked operating systems, but when fully-functional 3G iPhones arrive, Chinese programmers are likely to innovate a host of applications that will make the phone indispensable, and could tip the scales in favour of 3G.

So far 3G has had a lukewarm reception in China, with just 2.8 million customers, or four per cent of the total cell phone population.

Plenty of people remain skeptical, however, about whether Unicom can take advantage of its opportunity. Inside the industry, the Unicom management are known for their fumbling. "If they can mess it up, they will," said one telecoms analyst.

To start with, their pricing offer is a mistake. Unicom iPhones, with their wifi disabled, are being priced higher than smuggled iPhones that will work on the Unicom service and have functioning wireless (the government ordered Apple to disable the wifi to protect its own barmy proprietary standard, Wapi, which no one uses anyway). The basic 16GB 3GS will go on sale at 3,999 yuan plus a further 3,000 rmb as a deposit.

And then it looks like all customers will be forced into signing a two-year contract on the phone. Western consumers who sign long-term contracts are rewarded with cheaper phones, but it appears that Unicom is either unable or unwilling to subsidize the cost of the iPhone. It needs hundreds of thousands of customers to make the deal a success, but at these prices it only managed to sign up 10,000 orders over the Golden Week holiday.

In short, their strategy smacks of a company lacking confidence.

Malcolm Moore writes for China Economic Review.

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