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Broken Trail and Siam Bend.

idannyb.wordpress.com has moved to http://iphonasia.com

Great Firewall blockage in China necessitates this move. Readers in China can now visit our blog without using a VPN connection. Please bookmark http://iphonasia.com/

idannyb.wordpress.com is moving to http://iPhonAsia.com

Great Firewall blockage in China necessitates this move. Readers in China can now visit our blog without using a VPN connection. Please bookmark http://iphonasia.com/

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Upfront cash and cashflow from Apple’s rumored iPhone in China deal

Washington Post’s Tameka Kee reports that Apple’s rumored 5 million iPhone sale to China Unicom will generate about $100 per unit in profit for Apple. Kee states that this is less than the estimated $400+ per unit that Apple now gets on its deal with AT&T. My reaction … “Um, yeah … no kidding” … We’re not on a level playing field in China. We need to get a toehold in China, with some 700 million wireless consumers, and then go from there. Besides this deal is far more profitable than the initial margin calculations suggest.

picture-342Let’s do a quick breakdown … iSuppli has a BOM estimate of $178.96 for the iPhone 3GS. The report from CBN states that Apple’s iPhone deal with China Unicom is for 5,000,000 iPhones purchased upfront for $1.46 billion. That’s $292 per unit less the $178.96 = $113. But there are other variables to consider. Apple will almost certainly NOT be providing China Unicom with the standard iPhone 3GS model. The special model for China will likely be the new model A1324 and it will likely cost less to build and distribute. If numerous reports are to be believed, this model will not include WiFi (a $5 to $10 savings per unit). Moreover, it is likely that China Unicom will cover virtually all shipping, marketing and distribution expenses associated with a China iPhone launch. So you can knock off another $18 to $25 per unit in expenses that Apple would normally incur.

Whether Apple will receive ongoing App Store and iTunes revenues under this China deal is a large question mark? Pure conjecture on my part, but I would not be surprised to learn that Apple has assisted China Unicom with the development of a China Unicom branded version of Apple’s App Store and iTunes. A bit more background and flat out guesswork

Li Yizhong - MIIT VM

Li Yizhong - MIIT VM

Apple’s China iPhone negotiations have ostensibly been with potential carrier partners (first China Mobile and later China Unicom), but the watchful parent has always been in the background whispering instructions into the child’s ear. It is my view that China’s Ministry of Industry and Information Technology (MIIT) has had the final say on the iPhone deal terms. And it’s apparent that China’s MIIT has no intention of allowing Apple, or any handset manufacturer for that matter, to capture substantial wireless value added services (WVAS) revenues that China feels belong to its indigenous carriers. Consequently, to get any iPhone deal done in China, Apple may have been required to give up a large portion of revenues from the Apple iPhone platform (iTunes and App Store). picture-2That does not mean “no apps” or music for China iPhone owners. It just means a different platform, one with China Unicom’s brand. This will likely be a cloned version of Apple’s platform designed by Apple for China Unicom. I believe that Apple will be (shhhh … quietly) “cut in” for a certain percentage of WVAS revenues despite all of the posturing in the China tech press that “Apple will forego its revenue sharing model.” Since saving face is very important in China, I expect that Apple will not publicly disclose any assistance they may provide to China Unicom in developing their special iPhone WVAS platform, and nor will they publicly identify (break out) revenues from this WVAS partnership.

As with most Apple ventures, the iPhone deal in China will prove to be handsomely profitable and cash will continue to accrue to Apple’s bottom line … starting with a cool $1.46 billion up front!

5 million iPhone package sale to China Unicom? Carrefour to be a key iPhone distribution partner?

iphone-china-unicom-111-150x150Update – August 13, 2009: According to the Associated Press, China Unicom spokesman Yi Difei has denied the reports of an iPhone deal and large iPhone pre-purchase. Yi Difei stated “The report is not true.”… “There are all kinds of possibilities. There is no particular timetable for the talks.” Despite this denial, Zhou Fang, the CBN reporter who broke the story, discounts the China Unicom denial and noted that he had made audio recordings of the interviews with the Guangdong Unicom executives (Zhou Youmeng and Yu Zaonan) who spilled the beans.

Adding further legitimacy to the original CBN report is a post today on Interfax TMT and the news today from a Carrefour source. Chongqing Evening News, quoting a Carrefour employee, states that the iPhone in China deal is a go and Carrefour would indeed be part of the distribution plan. The report states that iPhones could be ready to go on sale as early as late August and that Carrefour stores in Guangzhou and other costal areas have begun preparing store displays.

Picture 1DoNews in China, citing “unnamed sources,” claims that China Unicom’s handset distribution division Vsens intends to have two other iPhone distribution channels (aside from retail chains) including CarrefourGomeand Suning. iPhonAsia (yours truly) had previously speculated that retail chains distributing iPhones might include Best Buy China and Wal-Mart China.

20073229August 11, 2009: According to an August 11 report in China’s CBN.com(China Business News), China Unicom has agreed to pre-purchase for inventory five million (5,000,000) special “for China” iPhones from Apple. The report states that China Unicom will pay Apple 10 billion CNY (USD $1,463 billion) or 2,000 CNY (USD $292.60) per unit, and that China Unicom will have a 3-year iPhone exclusive in China. CBN cites Guangdong Unicom’s Deputy General Manager Zhou Youmeng, as a prime source for this story.

Guangdong Unicom is a subsidiary of Beijing-based China Unicom. China Unicom’s subsidiaries are often quite independent and don’t always check with the parent in Beijing before launching marketing initiatives or speaking (leaking) to the media. Shanghai Unicom had their wrist slapped rather severely for comments to reporters re the rumored “iPhone deal” and for their publication of iPhone images on their subsidiary website back in March. It will be interesting to see how Beijing handles this latest leak by the Guangdong subsidiary. NOTE: Guangdong/Canton is China’s most populous region with over 150 million people.

445326.binCBN reports that China Unicom employees have been training on thenew model iPhone for China Unicom and it will be ready for launch in September. CBN also claims that Carrefour (134 superstores in China) will be a key iPhone distribution partner in China.

Marbridge Consulting reports that the new model iPhone for China was spotted by reporters attending the signing ceremony for China Unicom’s agreement with Carrefour. The new iPhone was apparently on hand as one of several 3G handsets that will be sold for China Unicom through Carrefour superstores.

Another source for the story, Yu Zaonan, a manager in Guangdong Unicom’s individual client department, stated that the iPhone will be priced at 2,400 CNY (USD $351) for an 8GB iPhone and 4,800 CNY ($702) for the 16GB model. Zaonan qualified his comments to CBN by stating that this plan was contingent on the formal signing of the deal by Apple and China Unicom in Beijing.

This latest buzz matches recent “insider source” leaks reported via Interfax TMT’s Cindy Ging and aJuly 28 report by China’s Oriental Morning Post.

With Greg Joswiak’s (Apple VP for iPhone Product Marketing) very recent trip to China, it appears that the “iPhone in China” deal may soon become more than just a hot rumor. 5 million iPhones will be, by far, Apple’s largest single iPhone package sale.

It’s August and time for a bit of sightseeing. I’m on a trek through Northern Idaho and Montana. Spent the last two days in Sandpoint, ID along Lake Pend Oreille. I’m now in Big Fork, Montana. Today’s drive from Idaho to Montana was spectacular. Headed north of Pend Oreille to Bonner’s Ferry to Moyie Springs to down to Troy Montana, to Libby to Happy’s Inn to Marion to Kila to Kalispell to Somers to finally to Big Fork Montana. Majestic scenery everywhere along the drive! Wide open lush meadows that seem to go on forever with the mountains and forest as the backdrop. Many lakes, rivers and streams to cool your feet in. I pulled over for a few quick photos and a short video (shot with my iPhone 3GS) at Kootenai Falls between Troy and Libby Montana.

No doubt that life is different up in the mountains. Never been in a grocery store with so many “trophies” mounted on the wall. Hunting’s not my thing. Don’t believe in it, unless you’re going to eat what you kill.

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Breaking news via TelecomsKorea

KT, formerly known as Korea Telecom, has officially confirmed its plan to launch Apple’s iPhone in the Korea market.

Picture 2KT Chief Financial Officer Yeon-hak Kim let the news slip in a conference call on Friday, “Apple iPhone will be in our smartphone line-up. … iPhone will help to expand the smartphone market and will contribute to increasing the ARPU”(average revenue per user).

Kim declined to provide any further details, including the launch date and distribution plans in South Korea.

iphone-south-koreaKT is the second largest carrier in South Korea with 15 million mobile subscribers (32% marketshare). The other primary iPhone suitor is SK Telecom, the leading mobile operator in the nation with 23 million mobile subscribers (50% marketshare). A SK Telecom spokesperson revealed on Tuesday that it too has been talking with Apple to introduce iPhone in South Korea. If a deal with SK Telecom is reached, then Apple’s iPhone will not be an “exclusive” in Korea.

Just speculation, but if the two top carriers in South Korea both wind up offering iPhone, then an “iPhone in Korea” launch date may be held up until the both carriers have inked a deal with Apple.

Picture 1Read more via > TelecomsKorea

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