Published Jan 16, 2008 (last update Nov 21, 2008)
Update June 1, 2008: This story is now dated. Given the recently announced China telecommunications industry restructuring, much has changed … Moreover, the headline of this post implies that China Unicom is out of the running as a possible official iPhone carrier partner. Not so! It’s becoming more evident that the newly constituted China Unicom/Netcom will win a W-CDMA 3G license (sometime post Olympics ) (early 2009 if reports are true). iPhonAsia believes China Unicom will be very much in the running as a viable iPhone distributor. Apple has shown that they are open to multiple carrier deals in the same market. This places both China Mobile and China Unicom in prime position for an iPhone deal. W-CDMA 3G is key. Update 11/20/2008 iPhonAsia believes that it is possible that China Mobile will be granted two 3G licenses – TD-SCDMA and W-CDMA.China Mobile will get TD-SCDMA only (and soon TD LTE 4G) and will rely heavily on their more tried and true GSM (EDGE 2.5G) network. All of their new TD-SCDMA ready phones will be dual compatible with EDGE 2.5 G … China Mobile is working furiously with chip manufacturers to resolve a TD chipset transition bug … The fix will enable switch back to TD-SCDMA if/when the phone loses signal and switches over to EDGE from TD-SCDMA.
Look for a TD iPhone 3G TBA in January 2009 … iPhonAsia believes any Apple iPhone deal with China Mobile will be non-exclusive. China Unicom remains very much in the running for an iPhone deal too. See related iPhonAsia posts > HERE … HERE … HERE … HERE … HERE … HERE … HERE … and HERE
The China telecommunications industry is in the midst of a major restructuring that has (and will continue to) directly affect Apple’s iPhone negotiations with carrier partners in China. The recently concluded National People’s Congress (NPC) served as a forum for carriers and ministries to finalized the restructuring details. Carriers are now making behind the scenes implementation plans.
Perhaps most relevant to Apple is the soon to be announced China Telecom acquisition of China Unicom’s CMDA division. China Telecom will also be granted a 3G license and may well win the rights to build out the W-CDMA 3G CDMA2000 network. The rights to W-CDMA are key to securing a deal with Apple. I expect a battle for the W-CDMA rights as both China Mobile and China Unicom/Netcom will aggressively lobby the MII for the rights to the W-CDMA 3G protocol. China Mobile has been given the responsibility for making TD-SCDMA a success. A daunting task see – https://idannyb.wordpress.com/2008/02/01/rumor-china’s-td-scdma-3g-may-not-be-long-for-this-world/
The MII may force China Mobile to keep on their TD-SCDMA “indigenous innovation” assignment and leave the prized W-CDMA network to the newly constituted China Unicom/Netcom. If this scenario plays out, China Unicom/Netcom will become serious competitor to China Mobile and viable partner for Apple to launch iPhone in China.
Look for China telecommunications industry restructuring announcements post Olympics. The logistics of restructuring may take the balance of 2008 to finalize and hence “iPhone in China” launch via a carrier partner might be pushed out to early 2009. This does not mean that Apple will be precluded from officially launching the iPhone in China in 2008. In fact, I expect that Apple will pursue a dual (locked to carrier + unlocked) iPhone launch strategy in nations such as China where the majority of customers are pre-pay (not on contract). Tim Cook hinted at the Goldman Sachs Technology Conference that Apple would be open to new business models.
Paraphrasing Tim Cook:
“We are going to enter Asia this year!”
(answering a question about Apple’s iPhone “exclusive carrier” business model versus multiple carriers in each market)…
“Are we married to this business model? … Will we do that everywhere? We are not married to any business model. … What we are married to is shipping the best phone in the world and continuing every day to innovate and making it better and moving it from a device to a “platform” … we are married to that …
When you look at some of the international markets, you find that the markets are very different … you might find one where there is no post pay business … or minimal (post pay) … that might need a different business model. You might find one (market) where being exclusive might not be in our best interest.
And so I am not announcing what we will and won’t do … I am announcing that we are going to intelligently think about each one (each market) and then decide what is best for the company to do … And I will tell you that there is no shortage of interest in the iPhone by the carriers. You know I think that they see it as an enormous way to increase ARPUs (Average Revenue Per User) on their system … I think they see it as a fundamental, revolutionary device that gets people interested in data and really using their (the carriers’) network.”
Reading between the lines …
One “clear as a bell” (yet unstated) message from Tim Cook …
“Oh yeah … we have several new carriers deals + marketing/distribution plans all signed, sealed and delivered. And we are ready to roll shortly after our 3G iPhone is unveiled to the world”
Timing of new deal announcements and 3G iPhone unveiling? Certainly in time to sell millions of iPhones in calendar year 2008 … My guess would be late Spring to early Summer 2008 … and I would expect at least two and perhaps three new iPhone models with different features (nano, full-size, and ultra-portable MacPhone?) and price points to address the widest market possible.
iPhone in Asia Editorial Comment:
iPhone in Asia fully supports the notion of selling both a locked and unlocked iPhone in concert with all new carriers deals to be announced throughout the world.
I suspect the new 3G iPhone will be more hack resistant, yet there is no end to the resourcefulness of locksmiths. Unlocking could become far less a problem if Apple works out (with TBA carriers’ blessing) a two-tier offering … a locked iPhone w 2-year contract and a premium-priced unlocked iPhone in the same market.
This would follow the iPhone in France via Orange model (French law prohibits handsets from being locked to a network for more than 6 months). Such a move by Apple would preserve the revenue sharing model (albeit at a slightly lower revenue share as I imagine 20 to 30% would choose buy the “unlocked” iPhone), and at the same time deliver a death-blow to the black-market for hacked and jail-broken iPhones.
Setting the right price-point for the unlocked iPhone will be important. If the premium for the unlocked iPhone is too high, black-marketers will engage in arbitrage (unauthorized unlocking options at a lower cost). If the premium is modest, or “just right,” buyers who want to unlock will opt for the “official” easily upgradable iPhone that will come with a warranty and w/o the need to hack or jail-break.
~ Dan Butterfield
Editor iPhone in Asia
The Interfax China News Agency has published a thorough article on the prospects for China Unicom to become a distribution partner for iPhone in China. This is recommended reading. See HERE.
Shanghai – January 16. INTERFAX-CHINA -The reported suspension of talks between China Mobile and Apple is unlikely to mean China Unicom will become the exclusive distributor for Apple’s iPhone handsets in China, according to an analyst.