Apple, China Mobile talks for iPhone stall

January 15, 2008

Apple and China Mobile could not agree on a revenue-sharing agreement

China Mobile Ltd. just didn’t bite.

Apple Inc. may have to find a new way to enter the Chinese market as its initial negotiations with China Mobile have ended. China Mobile Communications Corp., the parent of Hong Kong-listed China Mobile, said yesterday it has ended talks for now with Apple over the launch of the iPhone in China.

Analysts and market watchers say the lack of an agreement would have little impact on China Mobile. But it may open a door for rival China Unicom to strike a deal with Apple, though such a deal would be less substantial for the U.S. company.

“China Mobile is by far the dominant carrier, in terms of subscribers, with nearly 362 million, according to online reports,” said Neil Strother, analyst at JupiterResearch, New York. “So any vendor, Apple or otherwise, would want to strike a deal with China Mobile.

“If Apple ends up with China Unicom – with approximately 120 million subscribers – that would be OK, but Apple would have a much smaller subscriber base to target its products,” he said.

China Mobile, the world's biggest mobile-phone company by subscribers, charges users for downloading games, music and Web sites over its wireless network.

Reportedly, during and first- and second-round negotiations, Apple and China Mobile could not agree on a revenue-sharing agreement. Apple wanted 20 percent to 30 percent of the revenue for its iPhone sales.

China Unicom may be more willing than China Mobile to give Apple a larger percentage of user fees given its smaller share of China's mobile phone market, according to industry experts quoted in the media.

The decision to cease negotiations was further influenced by the iPhone’s inability to support MMS, according to qq.com, which quoted China Mobile data department general manager Gao Nianshu.

China Mobile already has an agreement to sell Research In Motion Ltd.'s BlackBerry handsets in China. Though RIM’s devices are not as trendy as an iPhone, its BlackBerry Pearl has multimedia capabilities, including MMS support, a sleek design and full Internet browsing capabilities.

Reports said that China Mobile claims it intends to enter third-round iPhone negotiations with Apple.