iPhone to finally come to China

Apple is finally set to launch the iPhone in China after finalising a deal with the country’s second-largest mobile carrier, China Unicom. The three-year agreement, which was confirmed during China Unicom’s first-half earnings announcement, follows months of launch speculation. The handset is due to go on sale in Q4 2009.

Under the exclusive deal, China Unicom will buy the devices on a wholesale basis, selling them on at a subsidised price. The operator said it will not share device revenues with Apple, a concession many iPhone partners are forced to make in western markets.

Though pricing and other financial details were not disclosed, recent reports claimed the device would sell for CNY2,999 (USD438), with users obliged to spend the same amount on pre-paid minutes. Previous reports claimed that China Unicom had ordered some 5m devices to secure the deal, spending a rumoured CNY10bn (USD1.46bn).

In order to comply with government regulations, designed to safeguard profits among China’s three state-owned telcos, the device will go on sale in China with its Wi-Fi capabilities disabled. However, the iPhone release is due to coincide with the roll out of China Unicom’s 3G network in September.

China has a total of some 650m mobile phone users. And though the deal is a major achievement for Apple in terms of marking its first entrance into the world’s biggest mobile market, commentators are split over how profitable the deal will prove for both Apple and China Unicom.

Though China Unicom CEO, Chang Xiaobing, says he expects the iPhone to lure more high-end users and help ?change the structure of our customer base?, the phone will be forced to compete with a slew of cheaper devices. Some analysts estimate as many as 1.2m iPhones are already available, with Wi-Fi enabled, on China’s black market, while fake devices that copy many of the phone’s features can reportedly be bought for as little as CNY400 (USD59).

The iPhone deal also comes ahead of a number of anticipated launches, with several Android phones expected to hit the market later this year, alongside 3G devices by makers such as Nokia and Samsung. Research in Motion and Palm are also said to be in talks about launching their Blackberry and Pre handsets in the country.

A recent report by Danish market researcher Strand Consult alleges that the heavy subsidies paid by operators around the world to carry the iPhone are not beneficial. The report dismisses as a "myth" claims that the iPhone creates data traffic and helps operators attract new customers.

China Unicom announced the deal as the same time as it reported first-half profits of CNY 6.62bn (USD969m). Though this was down 45% year-on-year it came ahead of Reuters estimates, which predicted profits of CNY6.2bn.