China Unicom's Smart Call on Cheap Phones

Despite recent video out of China of egg-wielding customers angry about shortages of Apple’s iPhone 4S, that’s not where the mobile-phone action is on the mainland. China Unicom Hong Kong, the nation’s No. 2 carrier and an iPhone distributor, really saw its business take off last year when it began pushing smartphones that cost 80 percent less than Apple’s coveted device.

After previously courting high-end customers, China Unicom in May started selling handsets from local manufacturers Huawei Technologies and ZTE that cost less than 1,000 yuan ($158), about half a month’s salary for an urban Chinese worker. The 16-gigabyte iPhone 4S costs 4,988 yuan or up to 5,880 yuan (without a contract). The low-end strategy helped make Unicom the best-performing stock on Hong Kong’s benchmark Hang Seng Index last year, with a 47 percent increase, and has put China on course to top the U.S. in smartphone users this year. “People aspire to own an iPhone, but they can’t afford it,” says Teck Zhung Wong, a Beijing-based analyst at IDC China. “If a vendor offers a phone that can do most of the things a high-end device can do, there’s no reason people won’t bite.”