Analysts adjust their Chinese iPhone estimates following sales that one describes as "soft"

iPhone buyers in Guangzhou. Photo: iPhonAsia

Following press reports that China Unicom (CHU) only managed to sign up 5,000 new iPhone subscribers after four days of sales, Piper Jaffray's Gene Munster and Barclays Capital's Ben Reitzes each issued notes to clients Tuesday that tried to put a positive spin on the news.

"The China launch is a disappointment," Munster acknowledged. But he added that it reminded him of the launch of the original iPhone in June 2007, when reports that AT&T had activated only 146,000 iPhones in two days caused "unfounded concerns among investors" about the device's long-term potential.

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Despite high prices and lack of Wi-Fi, hundreds line up in Beijing to buy Apple's smartphone

iPhone buyers in Beijing. Photo: it.chinanews.com.cn

Nobody camped out overnight and the lines didn't stretch for whole city blocks, but an hour before the iPhone was set to make its official debut in China, reporters in Beijing counted nearly 300 customers queued up to buy it, according to ChinaNews.com.

The first sale was scheduled to be made at 6:30 p.m. Friday Beijing time following an elaborate launch ceremony at the "The Place," China Unicom's flagship store. Apple vice president Greg Joswiak spoke at the event, calling it "an extraordinary day."

The line at Apple's all-glass store in the Village at Sanlitun retail development was smaller, but at one point grew to at least 150 customers long, according to a late update on MobileCrunch. Customers at the Sanlitun store told reporters they hoped to get better service by buying directly from Apple.

Although China is the world's largest cellphone market with more than 700 million subscribers, Western press reports have suggested that China Unicom (CHU) might have trouble attracting buyers under the terms of the deal it struck with Apple (AAPL). Due to restrictions imposed by the Chinese government, the iPhones being sold Friday won't have a Wi-Fi receiver.

They also cost from 4,999 yuan ($730) to 6,999 yuan ($1,025) for a 32 gig iPhone 3GS without a service plan. That is 20% more than the 5,700 yuan ($835) street merchants are changing for an unlocked gray-market 32 gig iPhone 3GS with Wi-Fi. China Unicom's iPhones are much cheaper — in some cases, free — when purchased with a long-term service contract.   More

Source: Morgan Stanley

One of the biggest drivers of Apple's (AAPL) growth — and the company's share price — over the next two years will be the expiration of the exclusivity deals Steve Jobs cut with carriers during the iPhone's first two years.

That's the conclusion of a surprisingly bullish report issued Friday by Morgan Stanley's Kathryn Huberty, long considered a leading Apple bear.

"We expect Apple to broaden iPhone carrier distribution over the next two years and believe this opportunity is under-appreciated by the investment community," she wrote. "This total opportunity is substantial — it adds up to an incremental 20.3M iPhone units and $3.76 in adjusted EPS, 100% and 41% of iPhone units and adjusted EPS respectively."

Her "case study" is France, where the iPhone's market share grew 136% after the government ended Apple's exclusive deal with Orange. She expects similar — if not quite as dramatic — increases as Apple, in addition to opening new markets in China and Korea, switches to multi-carrier agreements in its largest markets. (The U.K. has already gone multi-carrier.)

The U.S. is the biggest prize in this respect, but she doesn't expect Apple to cut a deal with Verizon before that carrier's so-called 4G rollout is complete, some time in 2011.

Huberty offers three scenarios for investors — bullish, base and bearish — represented in the chart above. Using her base scenario she expects Apple to sell 41.7 million iPhones in calendar year 2010. She has raised her revenue estimate for 2010 to $45.3 billion from $38.2 billion and her estimated EPS to $10.50 — 13% above the Street's consensus.

[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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[UPDATE: On Sept. 28, China Unicom announced an iPhone price point more than twice as high as the one in this press report. See here.]

iPhones in China will be relatively expensive, but monthly charges will be among the lowest in the world.

So says the Xinhua News Agency, the official press service of the Chinese Communist government, quoting an unnamed "insider" at China Unicom (CHU).

According the Xinhua report published early Friday, China's No. 2 carrier will roll out the iPhone shortly after the Oct. 1-8 National Day holiday in four models: 3G 8GB, 3G 16GB, 3GS 16GB, and 3GS 32GB.

The entry-level version, the 8GB iPhone 3G, will cost 2,075 yuan ($303) according to this report — more than three times its U.S. retail price ($99).

But the iPhones in China will be bundled with two-year service packages that are considerably cheaper than AT&T's (T). According to Xinhua, the lowest-price service package will cost 126 yuan per month, about $18.45. (AT&T charges its U.S. iPhone customers a minimum of $39.99/mos. for voice service plus a mandatory $30/mos. for data.)

Total cost for China Unicom customers over two years: $746. Total cost for AT&T customers: $1,779.

These prices are slightly different than those quoted by China Business Times earlier this week. According to that report, China Unicom had set an "internal launch date" of Oct. 15 for two models: an 8 GB iPhone 3G selling for 1,999 yuan ($293) and a 16 GB iPhone 3G for 2,999 yuan ($439). Both models were said to be offered with 2 year contracts starting at 186 yuan ($27) a month.

China Unicom announced late last month that it had struck a deal with Apple (AAPL) to carry the iPhone in China, beating out giant China Mobile (CHL). China Unicom has 140 million subscribers; China Mobile has nearly three times that many.

Graphic: iPhonAsia

It's tempting to multiply China's 700 million mobile phone users by a percentage pulled out of a hat, and now that China Unicom has announced its deal with Apple (AAPL), everybody seems to be doing it.

Result: Published estimates of how many iPhones Apple will sell in China next year that range from a low of 1 million to a high of 14 million. Here are the numbers we've seen:

• UBS analyst Maynard Um: 1 million in fiscal 2010
• Sanford Bernstein's Toni Sacconaghi: 2.9 million by end of 2011
• Standard & Poor’s Clyde Montevirgen: 4 million in calendar 2010
• Susquehana Financial's Jeffrey Fidicaro: 2 million to 5 million
• Broadpoint AmTech's Brian Marshall: 5 million to 7 million in 2010
• iPhonAsia's Dan Butterfield: 14 million in the first year of sales

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Apple Inc.

Piper Jaffray's Gene Munster — an Apple optimist — took a lot of heat when he predicted two years ago that Apple (AAPL) would sell 45 million iPhones in 2009. Unfortunately for him, the deal he expected Apple to strike in China still hasn't materialized, and he's since cut his 2009 expectations back to 25 million.

Now comes Bernstein Research's Toni Sacconaghi — usually considered an Apple pessimist — with a report that has Apple selling at least 50 million iPhones a year by 2011, up from the 20 million he's modeling for this year.

How does Sacconaghi expect Apple to get from 20 million to 50 million?

In three steps:

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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

Chinese iPhone? Photo: Sina.com

Either there's a last-minute hitch that requires high-level intervention, or preparations to sell iPhones in China have entered their final stages.

"Senior officials from Apple Inc are to visit China this week, and they haven't arrived in Beijing yet," an unnamed "informed source" told the website Sina.com Monday night.

"Their visit aims to visit (sic) senior officials of China Unicom and discuss with them how iPhone should enter Chinese market," the source said, adding that Apple's representatives may also meet senior officials from the Ministry of Industry and Information Technology (MIIT).

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The headlines out of China overnight Tuesday were headsnappers.

First Shanghai Security News reported that Apple (AAPL) had reached a three-year deal with China Unicom to market the iPhone in the world's largest cellphone market (600 million-plus subscribers).

Then AFP and Reuters reported what China Unicom's spokesperson told them: that the two companies were still in negotiations and no agreement had been reached (something, by the way, any company dealing with Apple will say before Cupertino has had a chance to break the news itself).

What's important in all this, says iPhonAsia's Dan Butterfield, a veteran China watcher, are the details  leaking through the cracks. More