Apple airs its first Chinese-language ads as reports of retailer intimidation emerge

Supplementing print advertisements like the one at right, the first Apple-produced iPhone ads appeared on Chinese TV over the weekend.

They come on the heels of the device's somewhat sluggish start last month in the world's largest mobile phone market (more than 720 million subscribers).

Apple's (AAPL) local carrier, China Unicom (CHU), reported signing up only 5,000 new subscribers in the iPhone's first four days of sale, a result Western analysts viewed as disappointing.

In addition to the several reasons put forward — e.g., high prices, lack of Wi-Fi, a market saturated with knock-off and black-market phones — iPhonAsia's Dan Butterfield has added another: strong-arm tactics on the part of China Unicom's chief rival, China Mobile (CHL).

According to Butterfield, some of the country's most important mobile phone distributors are not yet selling the iPhone despite signed agreements with China Unicom. Reason: threatening letters from China Mobile warning them not to.

"The precise wording of these letters is unknown," writes Butterfield, "but this is more than just a suggestion." He then quotes — in translation — an article in sina.com:

"Many cell phone distributors received formal notification that 'Selling iPhones is not recommended,' or 'Selling iPhones is not allowed or China Mobile will fine you or stop cooperation with you.' "

Tactics like this, as 9to5Mac's Seth Weintraub puts it, "make Verizon and AT&T's little sissy war seem silly."

Below the fold: An iPhone ad with a Chinese accent and Chinese apps.

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[UPDATE: Dan Butterfield of iPhonAsia.com has slogged through the Mandarin in the press release and clarified some issues. See below.]

After a series of leaks last week to the Chinese business press — including Xinhua, the Communist government's official news agency — China Unicom (CHU) on Monday finally released some hard news about when and for how much it plans to begin selling Apple's (AAPL) iPhone in China

But not much news.

"When" is in October — which could be as early as Thursday or as late as 33 days from now.

"How much" is something of a mystery. The official word is around 5,000 yuan ($732.20) — considerably higher than the prices that were being tossed around last week (those ranged from 1,999 to 2,999 yuan).

But the carrier did not specify how much iPhone (8 GB? 16 GB? 32 GB?) 5,000 yuan might buy.

And it offered some details — but not quite enough — about the service plans that will accompany those iPhones and reduce their initial sticker price.

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China Unicom announced Friday that it had struck a deal with Apple (AAPL) to bring the iPhone to the world's largest cellphone market.

The announcement ends months of speculation and represents a coup for China Unicom, the country's No. 2 carrier with more than 140 million subscribers. Apple's negotiations with giant China Mobile (nearly 500 million subscribers) broke down earlier this year.

"We believe China Unicom's high-speed mobile broadband network, coupled with … (the iPhone) will create new communication and different experiences for customers in China," said Unicom CEO Chang Xiaobin at a news conference.

A brief statement in the press release announcing China Unicom's interim earnings said that a three-year deal agreement with Apple had been reached on Aug. 28 and that the initial launch was expected to occur in the fourth quarter of 2009. No details of pricing or revenue sharing were announced.

But according to earlier reports in the Chinese business press, China Unicom has agreed to buy 5 million iPhones for $1.46 billion.

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The PC maker widely rumored to be pursuing a phone for Chinese market. Is that a smart call?

Will Dell go mobile in China? Photo courtesy of Dell.

Will Dell (DELL) be able to get a smartphone off the ground in China?

The mobile world is abuzz once again over rumors that the No. 2 PC maker has plans to do just that. According to a Techcrunch report and an article on Chinese news portal 163.com, Dell may soon offer an "oPhone" device featuring Google's (GOOG) Android mobile operating system. The reports say the phone will be called the "mini3i."

OPhone is the name for China Mobile's customized version of Android, an open mobile operating platform. The phone reportedly is "iPhone like," with a touchscreen and no physical keypad. Dell is not commenting on the rumors. A spokesperson will only say: "Any mention of Dell in context with smartphones would be speculation." More

UPDATE: China Unicom, as promised, launched its 3G service in 55 cities Sunday — with plans to expand to 284 cities by the end of September — but there was nothing in Chinese press accounts about its negotiations with Apple to carry the iPhone.

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For months, Apple (AAPL) watchers — counting the days until Cupertino finally brings the iPhone to mainland China — have had their eye on May 17, 2009.

Not only is Sunday World Telecom Day — or as the United Nations unhelpfully renamed it in 2005, World Telecommunications and Information Society Day — but it is the day China is scheduled to get its first 3G service based on WCDMA (Wideband Code Division Multiple Access), the protocol the iPhone 3G uses.

China's 640 million mobile subscribers represent the biggest prize on the planet for cell phone makers — the last missing piece in Steve Jobs’ master plan to blanket the earth with iPhones.

Before he went on a medical leave in January, Jobs had reportedly been working— without success — for more than a year to negotiate an iPhone deal with China Mobile, the country's (and world's) largest carrier with 477 million customers at last count.

One of several sticking points was the fact that China Mobile is planning to use its home-grown TD-SCDMA (Time Division Synchronous Code Division Multiple Access) protocol for 3G cell-phone coverage. In order for Apple to serve China Mobile's customers, it would have had to build a special Chinese iPhone with a new cellular modem chipset.

In February, a flurry of Chinese language news reports suggested that Apple had switched horses and was in serious negotiations with China Unicom, the country's second-largest carrier (135 million mobile customers), which has planned a high-profile launch of its 3G WCDMA service in 55 cities Sunday.

In March, China Unicom's Shanghai branch briefly posted an ad for the iPhone, as if the device were already in stock.

All the pieces would seem to be in place — except Steve Jobs is missing and so is the buzz from the Chinese business press that usually precedes a deal this big.

"We would like to be in China within the next year," COO Tim Cook told analysts in a quarterly earnings call last month, "[We] are currently working on that, but I have got nothing specific to announce today." (link)

Dan Butterfield, whose iPhonAsia blog keeps close tabs on Apple's business dealings in the Pacific Rim, wrote last week that the company may prefer to hold the announcement of any China deal until it can combine it with the unveiling of the next-generation iPhone.

Besides, he adds, "it is one thing to announce a deal, and another to actually launch."

"Given production, distribution and other corporate logistics, it is iPhonAsia’s view that there will be no iPhone launch in China before July 1. It is more probable that a formal launch won’t happen until mid to late summer 2009." (link)

The key dates to watch, according to Butterfield:

• Sunday, May 17 — World Telecom Day and China Unicom's 3G launch
• Monday, June 8 — The World Wide Developers Conference keynote, a logical place to unveil new iPhone hardware and announce a big distribution deal
• Late June or early July — The timeframe in which Piper Jaffray's Gene Munster speculates Apple may host a special event to celebrate Steve Jobs' return and launch iPhone 3.0.

See also:

• China Unicom posts ad for iPhone
• New Chinese iPhone talks target May 17
• China Mobile’s iPhone negotiations enter endgame

Has Apple switched horses in China?

That's the thrust of a pair of news reports out of Beijing this week that suggest a deal to carry the iPhone in China could be reached as early as May 17.

The first report, published Monday by Interfax-China, offered a recap of the sticking points that seem to have scuttled negotiations between Apple (AAPL), which is desperately seeking a partner in the world's largest cell phone market, and China Mobile, the country's — and the world's — largest carrier (415 million subscribers at last count).

According to a source who claimed to have been briefed by China Mobile president Wang Jianzhou himself, the "third and final round" broke down over which company gets control of the App Store in China. (link) [See UPDATE below for the latest twist.]

The second story, filed Wednesday by China Business News via China.org.cn, reports that Apple is now negotiating with China Unicom, the country's No. 2 mobile carrier (about 130 million subscribers).

"Yes, we are in talks with Apple Inc.," a China Unicom manager told the newspaper. (link)

According to this account, the two companies have had several rounds of negotiations, beginning as early as last October, and have stumbled over some of the same issues as the China Mobile talks — including government restrictions on cell phones with integrated Wi-Fi.

But China Unicom has an edge over its larger competitor: On May 17, it will launch China's first 3G service based on the WCDMA (Wideband Code Division Multiple Access) protocol — the one Apple employs. That would allow China Unicom's customers to use off-the-shelf iPhone 3Gs without modification.

China Mobile, by contrast, is sticking with its home-grown TD-SCDMA (Time Division Synchronous Code Division Multiple Access) protocol for 3G service. In order for Apple to serve China Mobile customers, it would have to build a special Chinese iPhone with a different cellular modem chipset.

So keep your eye on May 17 … but don't hold your breath.

"We will enter Asia with the iPhone in 2008," acting Apple CEO Tim Cook said nearly a year ago, as AllThingsD's John Paczkowski reminds us.

"We will one day enter China," Cook added. "We’re not saying when."

UPDATE: China Mobile and Apple are "currently negotiating iPhone cooperation" according to a report in China Business News Thursday. The brief item, which comes via the English language headline service JLM Pacific Epoch, attributes the remark to China Mobile CEO Wang Jianzhou. iPhoneAsia speculates that "cooperation" might be a ploy designed to keep the estimated 1 million Chinese iPhone owners currently using China Mobile's EDGE network from switching to China Unicom when its 3G service arrives.

Things seem to be heating up again for the iPhone in China, according to several press accounts early Tuesday.

The most promising was an item in 21st Century Business Herald, a Chinese state-controlled financial paper, which described talks between Apple (AAPL) and China Mobile (CHL), the world's largest cellphone carrier, as in their "final stages," according to AFP.

Meanwhile, both Reuters and Network World carried remarks made by China Mobile CEO Wang Jianzhou on Tuesday that were only slightly less encouraging.

"Steve Jobs and I hope the iPhone will enter China as soon as possible," Wang told reporters at the ITU Telecom Asia 2008 exhibition in Bangkok. "We are discussing this issue but we do not have an agreement." (link)

Wang declined further comment, citing a non-disclosure agreement with Apple.

A deal with China Mobile would be the capstone of an aggressive expansion program that has brought the iPhone to 43 countries and 660.5 million potential customers in 2008.

China alone has more than 600 million cellphone subscribers, and 415 million of them get their service from China Mobile, according to interim results published last week (link).

Apple has been in talks with China Mobile for the better part of a year. The main sticking point — Steve Jobs' insistence on revenue sharing — was taken off the table in June. It's not clear what's holding things up now.

The overseas iPhone deal that could prove to be Apple's most important has cleared its final hurdle, according to two reports out of China.

"Apple is no longer insisting on a revenue-sharing policy," China Mobile spokeswoman Rainie Lei told Reuters on Friday, "so the biggest hurdle for China Mobile to bring in the iPhone has been cleared."

"We've broken through the biggest obstacle," Gao Songge, deputy director of China Mobile's general department, told Agence-France Presse. "And we are negotiating at the working level."

China Mobile is the world's largest mobile phone carrier, with more than 380 million customers. Talks with Apple had reportedly broken off over Cupertino's insistence on getting a share of the carrier's monthly revenue, something China Mobile said it would never agree to.

Although Apple (AAPL) has since dropped that demand in many of the overseas contracts signed this year, most observers assumed that the China deal wouldn't materialize before 2009.

But Steve Jobs told CNBC two weeks ago that he expected deals with both China and Russia — the other big hold-out — to come a lot sooner than that.

"We just didn't have a chance to get close with Russia and China," Jobs told the network. "And I think you'll see them happen later this year." (link)

In a separate news item, MarketWatch reported Friday that China Mobile will be providing 3G cellular service at the Beijing Olympics using its own Time Division Synchronous Code Division Multiple Access, or TD-SCDMA, standard. Visitors to Beijing using WCDMA-based devices will get much slower connection speeds as service automatically drops to 2.5G. (link)

There were plenty of losers Monday in the wake of the People's Republic of China's sweeping overhaul of its telecommunications industry.

China Mobile lost more than $25 billion in market value after the government announced over the weekend that it was merging two smaller competitors in an effort to weaken the giant carrier's hold on the country's cell phone business — prompting Goldman Sachs to issue a rare "sell" rating on China Mobile's (CHL) shares.

Markets sank across the Pacific Rim on the news. Hong Kong's Hang Seng fell 2.4%. The Shanghai Composite Index dropped 3.1%. Japan's Nikkei slumped 2.3% to its lowest level in a month

But there may be several winners: including Steve Jobs' Apple.

Since last fall, Jobs has been trying — without success — to negotiate an iPhone deal with China Mobile. The country's 583 million subscribers represent the biggest prize on the planet for cell phone makers — the last missing piece in Jobs' plan to blanket the earth with iPhones — and China Mobile controls two thirds of them.

But since the companies last talked, two things have changed. In its recent flurry of deals with other foreign carriers, Apple seems to have backed away from its insistence on hefty revenue-sharing formulas in exchange for exclusivity — the sticking point in its early negotiations with China Mobile.

And now China Mobile's hand has been weakened by its own government.

A Chinese statement issued Monday said that the mergers would set in motion the awarding of licenses for 3G service that supports wireless video, Web surfing and other services, according to an AP report.

That report added that the restructuring would create opportunities for foreign equipment vendors such as Ericsson (ERIC), Alcatel-Lucent (ALU), Nokia (NOK) and Siemens (SI).

We're adding Apple (AAPL) to that list.

Remember Apple's (AAPL) on-again off-again negotiations with China Mobile, the No. 1 wireless carrier in China?

Well, here's one reason the talks may have broken down: According to China Mobile, there were already 400,000 cracked iPhones using its cellular network by the end of 2007.

That number, if accurate, is astonishing. It would mean that there are more unauthorized iPhones in China than there are authorized iPhones in Europe. It would account for the largest part of the so-called "missing" iPhones. And it would suggest that China Mobile may be far less willing than the European carriers to give Steve Jobs the hefty revenue sharing cut he demands in return for the right to be that country's exclusive iPhone carrier. Why should China Mobile pay for what it's already getting for free?

Of course, it's also possible that the number is bogus, a trick card being played by China Mobile in the high-stakes poker game it is playing with Cupertino. The figure first appeared, as near as we can tell, in a report written by Anty Zheng, content manager for an online newsletter called In-Stat China. For the full text, see here.

Zheng goes on to argue that an Apple-China Mobile deal would be good for both parties:

We have never doubted that the iPhone will achieve greater success than iPod in China if Apple teams with China Mobile to launch its Chinese version. There are two reasons. Firstly, different from the US where the smartphone market is fairly limited, appealing primarily to business users, The smartphone market in China, though, is an entertainment-oriented individual consumer market. The main reasons that Chinese mobile users purchase smartphones include entertainment (such as music players, cameras and video) and to access mobile Internet applications (such as IM, e-book, and games). We believe the iPhone will be favored by these consumers as it can better meet such demand. Secondly, high-end handset buyers significantly outnumber high-end mp3 player buyers. We estimate that 20% of handsets sold in China in 2007 cost more than 4,000 RMB (US$533). In another words, there are an estimated 28 million potential users for the iPhone in China. (link)

Thanks to Silicon Alley Insider for the tip.