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.

According to these press reports, Apple is building two different iPhones for the Chinese market.

The first to win approval by the Chinese Ministry of Industry and Information Technology does not receive Wi-Fi signals — a feature Apple agreed to remove in order to get around Beijing's restrictions on handsets with high-speed Internet capability.

But according to Dan Butterfield, editor of iPhonAsia, a second model has been submitted to China's Telecommunication Tech Labs for testing that is capable of receiving both Wi-Fi and WAPI, a Chinese standard for wireless networks.

The deal announced on Friday represents the biggest prize in Steve Jobs' two year campaign to blanket the world with iPhones.

As of June, Apple had sold 26.4 million iPhones in more than 80 countries.

China has some 700 million mobile customers. Its large and growing middle class has both disposable income and a sophisticated taste for high tech gadgetry. An estimated 1.5 million gray market and counterfeit iPhones have already made their way to China.

Sanford Burnstein's Toni Sacconaghi told the Wall Street Journal earlier this week that he believes Apple will sell 2.9 million iPhones in China by the end of 2011, an estimate that seems low given reports of a 5 million unit pre-sale.

See also:

• How many iPhones will Apple sell in China?
• Apple execs reportedly flying to China
• Report: 'Crippled' iPhone coming to China in September
• China Unicom posts ad for iPhone

Randall Stephenson’s business is all about connectivity, which means these days the AT&T chairman and CEO spends a lot of time talking about Apple.

While the company may have an exclusive deal with the maker of the iPhone, Stephenson said don’t expect it to last forever, although he wouldn’t expand further.

When asked if he was completely satisfied with AT&T’s relationship with Apple, Stephenson said, “I don’t think I could get my wife to say that about me so I don’t think I could say that about a business partner.”

While he thinks that on balance the relationship with Apple works well, there are some areas he’d like to “tweak,” such as the expense of the handset. “You subsidize these handsets with the expectation you’re going to get a high-end customer,” he said, speaking on the back of quarterly results, released this morning.

Responding to an audience question, he did acknowledge that the company is having network issues in some markets, centered around were iPhone penetration is highest.

“It’s a big deal,” he said. “All of us rely on these services for our day-to-day activity,” adding that “you’re only going to win in this business if your network quality is the best.”

But Stephenson said no one is experiencing the same volume levels as AT&T, and the company is spending billions of dollars to address these problems.

Stephenson also revealed that he’s a big fan of the Kindle. “I bought one of the first devices out and fell in love with it,” he said. While the Kindle may or may not be the one that got away for AT&T, the company has partnered with e-reader maker Plastic Logic to capitalize on what Stephenson thinks are going to be very important devices in the future.

Those 1 million iPhone GSs sold last weekend represent a "remarkable achievement," writes RBC Capital's Mike Abramsky in a note to clients issued early Tuesday, especially considering the new iPhone's relatively narrow international distribution (8 countries vs. 21 last year).

But according to Abramsky, it's the old iPhone 3G — newly priced at $99 — not the new 3GS, that will drive global sales this fiscal year.

"While early buyers appeared to favor the iPhone S," he writes, "the $99 iPhone is expected to drive 30-40% momentum improvement, in countries like UK, Germany, France, and other parts of Europe and Asia where phones are more highly subsidized (on contract) and prepaid is popular (e.g. ~60% prepay in UK, ~90% in emerging markets like India)."

Abramsky expects Apple to sell 20 million iPhones in fiscal 2009, 64.5% of them the older 3G models. By his estimates the new 3GS won't dominate sales until fiscal 2010, when he expects Apple to sell 30 million iPhones, roughly 60% of them 3GSs. See chart and spreadsheet below.

On Monday, Apple announced that it sold 1 million iPhones 3GSs in three days of sales. The company has not released the number of iPhones 3Gs sold since that device's price was lowered to $99 from $199 on June 8.

If a picture is worth a thousand words, here's five grand worth of Apple (AAPL) news in charts and lists released over the past couple of days.

1. Web Brands. Apple scored No. 10 in Nielson Online's ranking of the top Web brands based on the number of unique visitors each site drew in December 2008 — which isn't bad considering Apple.com's focus is so much narrower than the brands it's up against, like Google (GOOG), Yahoo (YHOO) and Amazon (AMZN). (link)

2. Social Brands. The iPhone scored No. 1 — ahead even of its parent company at No. 3 — in the Vitrue 100, a new ranking launched this week by an Atlanta-based marketing company with a deliberately misspelled name. Vitrue's list ranks blue chip brands by how often they get mentioned in blogs, photo-sharing sites and such social media entities as Facebook, MySpace and Twitter — presumably a measure of how large these names loom in the minds of an emerging category of early adopters.

3. Days to 1 Million. This comes from an Engadget reader named Noel F. who used published sales data to compare the rate at which the leading smartphones achieved the market penetration milestone of 1 million units. However, as Engadget's Tom Ricker notes, this leaves out the important factor of geographical footprint at launch. The Google Android G1, for example, launched only in the United States. The iPhone 3G was released simultaneously in 21 countries. (link)

4. Volume vs. Revenue. CounterNotions's Kontra uses data from GigaOm's Jose Fermoso to demonstrate that what matters is not how many smartphones you sell, but how much you make on each sale. Unfortunately, both writers' comparisons are a bit off since Apple's Q1 numbers include revenue and earnings not just from iPhones, but also from Macs, iPods and other goodies.

5. Stock Price. Finally, a glance at Apple's share price, which having suffered a thousand cuts in the past year finally picked up a little traction in the past two weeks.

For much of last year, AT&T (T) Mobility's websites seemed to be promoting every cell phone in their arsenal except for the iPhone — as if the company wasn't sure the revenue coming in from iPhone users was worth the steep bounty it was paying Apple (AAPL) for each sale.

No more.

Today when you visit its website, a promo for the iPhone 3G ("Now Available Online!") is often the first thing that pops up  — and based on the fourth quarter results the company released Wednesday, you can see why.

The iPhone is still an expensive proposition for AT&T. The kickback to Apple — between $288 and $432 per phone over the life of a 2-year contract, according to various estimates — and the $450 million the company says it spent last quarter on network upgrades to provide high-speed 3G coverage, contributed significantly to the 23% year-to-year decline in AT&T's quarterly net income (to $2.4 billion from $3.1 billion).

On the other hand, Q4 revenues were up 2.4% (to $31.1 billion) in a tough economic climate thanks to results in the wireless division that CEO Randall Stephenson attributed largely to the iPhone.

"The success of our iPhone 3G launch has driven wireless growth and helped redefine the wireless data space," he said in a press release.

How did the iPhone do that? Let us count the ways:

1. AT&T has activated 4.3 million iPhone 3Gs since its launch, 1.9 million in Q4 alone — more than double its iPhone activations one year earlier.
2. The average revenue from Phone users is 60% higher than the typical AT&T customer — thanks to that $30 per month data fee. Their heavy use of Web services helped drive AT&T wireless data use up 51.2% year to year, which as reader Jon in Brentwood, Calif., points out is not necessarily a good thing.
3. About 40% of the iPhone activations this quarter were new AT&T customers, either buying their first cellphone or switching from another carrier.
4. The churn rate — the percentage of customers who drop AT&T's service — among iPhone owners is significantly lower than the rest of the network, sharply reducing marketing costs.

Although iPhone 3G activations were down 21% quarter to quarter — to 1.9 million from 2.4 million after the device's July launch — they still outpaced Research in Motion's (RIMM) much hyped BlackBerry Storm. According to one estimate, Verizon (VZ) has activated some 1 million Storms in its first two month of sales.

The rise of the iPhone, like the course of true love, never did run smooth.

Quarterly sales last year varied widely, from a low of 720,000 in June to a high of 6,890,000 in September following the release of the iPhone 3G.

But that's nothing compared with the weird patterns that emerge from data collected by Net Applications, a Web metrics firm that tracks hits to its clients' websites on a daily basis — a total of 160 million visitors per month.

The chart above (full size below the fold), created by Hank Vaccaro of Standard Analytics and posted last week on The Mac Observer's Apple Finance Board, displays Net Applications' iPhone data for the device's first 18 months on the market. The first part of the chart is drawn from weekly data; the last part includes daily variations.

With the caveat that this graph represents how frequently iPhone owners are using the Web, not iPhone sales or market share, it still tells us quite a bit about the iPhone's growth over the past year and a half.

First, by tracking the seven-day moving average (the red line in Vaccaro's graph), we can see four clear spikes:

1. The initial release in June-July 2007
2. Holiday sales in Dec. 2007
3. The release of the iPhone 3G in July 2008
4. Holiday sales in Dec. 2008

We won't know how strong sales were in December until Apple (AAPL) releases its quarterly earnings next week (Jan. 21 at 5 p.m. EST), but based on the magnitude of that last bump, they shouldn't be too shabby. (Citibank's Richard Gardner on Tuesday cut his 12-month price target for Apple shares from $153 to $132 based in part on what he called "soft 4CQ08 iPhone shipments," but didn't say where he got his data.)

And what about the strange saw-tooth pattern in the last part of the chart? That's created by the daily variations in Web hits. On weekdays, the Internet tends to be dominated by office computers — mostly PCs running Windows. But on weekends, home users take over, and that includes a higher percentage of Macs, iPhones and other non-Windows devices. The variation is striking — as much as 40% in a single day.

But it all smooths out in the long run, as represented in Vaccaro's chart by a thick black line, and the trend — so far — is an exponential rise.

See also:

• iPod touch use "exploded" Christmas day
• Apple's Internet share registered strong gains in December
• iPhone Web share hits record 0.48%, up 58% in one month

Below the fold: Vaccaro's chart, full size:

If it was Steve Jobs' intention to take the wind out of Macworld's sails, he's done a pretty good job.

"Expectations are low," wrote Piper Jaffray's Gene Munster in a note to clients early Tuesday, one week before the first Macworld Expo keynote since 1997 that won't be delivered by Apple's charismatic CEO.  "No significant new products are expected."

"Fairly modest" is how Kaufmann Bros.' Shaw Wu described investor expectations for the Expo, which runs from Jan. 5 – 9 in San Francisco and which Apple (AAPL) has already announced will be its last. "Frankly, we would be a little surprised if there is a major announcement, as we believe it would make better sense for Steve Jobs to do so himself at an AAPL event."

Behind Steve Jobs' Macworld exit

Both Wu and Munster are looking for Jobs' keynote stand-in — senior vice-president Phil Schiller — to introduce updated iMacs and redesigned Mac minis — hardly surprises given that both machines are overdue for a refresh.

Munster has not given up on the "new form factor iPhone" — a.k.a. iPhone nano — that he once thought would be announced at the January event. Now he doesn't expect it to arrive before the end of Apple's second fiscal quarter, which closes in March.

And he is sticking with his famous prediction — the most optimistic of any mainstream analyst — that Apple will sell 45 million iPhones in calendar 2009. But he reminds clients that that figure is predicated on his belief that Apple will enlarge its iPhone offerings, vastly expand its retail outlets and significantly lower its prices. So far it's only done one of the three.

Wal-Mart to sell iPhone starting Sunday

Shaw Wu also sees "strong indications" of a lower-cost iPhone and other "larger form factor touchscreen devices" — a.k.a. iPod tablet — later in the year. His sources hint that Apple may introduce a new "consumer device" next week — possibly a jazzed up Apple TV or a superconnected Time Capsule — a.k.a. home server — that would let you grab your files or do backups from anywhere on the Internet.

And Wu hasn't ruled out the possibility that Phil Schiller will surprise everyone next week with a breakthrough product that nobody is expecting, if only to send the message that Apple is a "much broader and deeper company than one person, even if he/she is a living legend."

For our part, we haven't given up on the possibility that Steve Jobs will make a surprise cameo appearance during Schiller's keynote, if only to show that he's still kicking — Gizmodo's latest rumor to the contrary — and still very much in charge.

AT&T (T) on Saturday began offering refurbished iPhones for the lowest price yet seen in the United States:

• $99 for a black 8GB iPhone 3G (refurbished)
• $199 for a black 16 GB iPhone 3G (refurbished)

The price points are not entirely unexpected. For several weeks before Christmas, Apple (AAPL) blogs were buzzing with rumors that Wal-Mart (WMT) would be selling a new version of Apple's iPhone at the magical $99 price.

But it was not to be. On Friday, Wal-Mart confirmed that starting Sunday, Dec. 28, it will carry the hot-selling phone at nearly 2,500 stores — but starting at $197, not $99.

AT&TS's $99 iPhones are the same old models, slightly used.

According to the small print on att.com,

Refurbished phones are previously owned devices that have been unused or lightly used and returned during the 30-day trial period. Each refurbished phone is independently quality tested and loaded with the latest software to meet current factory standards. Some refurbished iPhone 3G devices will have minor scratches.

Refurbished iPhone 3G devices carry a warranty of 90 days or more. For details about the warranty on your refurbished iPhone 3G go to www.apple.com/support/oss/.

The catch? The heavily discounted phones come with the usual 2-year contracts, which can cost up to $2,000, depending on the plan.

The sale ends Dec. 31 or when AT&T runs out of stock, whichever comes first. Macworld Expo starts the following week, leading to speculation that AT&T may be using the occasion to clear inventory in advance of new models or new memory configurations.

Wal-Mart confirmed Friday what everyone who follows Apple already knew: that it will begin selling Apple's iPhone 3G at nearly 2,500 Wal-Mart stores starting Sunday Dec. 28 — three days after Christmas.

Wal-Mart will sell the red-hot mobile device for $197 for the 8GB model and $297 for the 16GB model, or $2 off their current prices. There had been rumors that Wal-Mart would sell a $99 iPhone. (See Anatomy of a rumor: Wal-Mart's $99 iPhone.)

Wal-Mart, however, appears to be giving individual store managers some wiggle room on prices. According to the press release, the company's price match policy will allow stores to "match the price of any local competitor's advertised store price on the same item within the same promotional period." Best Buy is offering the iPhone for $190 for the 8GB and $290 for the 16GB models.

Getting the iPhone into Wal-Mart (WMT) is something of a coup for Apple (AAPL). Wal-Mart is the world’s largest retail chain — by far — with more than 7,000 mega-stores around the world and some 2.1 million employees. It finished its last fiscal year with nearly $380 billion in sales — earning it the No. 1 slot in the Fortune 500.

The move represents the fourth major expansion of the iPhone’s retail presence outside Apple’s own 200-plus stores. The phone was sold first at AT&T’s (T) 2,000 retail outlets, then at nearly 1,000 Best Buy (BBY) outlets (see here), and then at the tens of thousands of points of sale (many of them no more than mom-and-pop kiosks) that carry iPhones for Apple’s overseas partners.

Piper Jaffray’s Gene Munster has estimated that Apple could easily sell as many iPhones through Wal-Mart stores in 2009 as it sells through its own Apple Stores — by his calculation, about 4.5 million units. See here.