China Mobile and Apple Call Off iPhone Negotiations

By Bryan Gardiner

Talks between China's largest mobile operator and Apple about introducing the iPhone in the country have ended, according to company officials.

On Monday, a spokeswoman for China Mobile confirmed with the AP that the two parties have walked away from the negotiating table. At the moment, neither company is giving a specific reason.

"We can only say that negotiations have ended for now," a spokeswoman for China Mobile Communications told the AP. "We have no other news to report." Chinese Internet portal Sina.com promptly started reporting that (surprise, surprise), the deal-breaker was likely the 20-to-30 percent revenue share agreement Apple was likely demanding.

Late in November, a similar report surfaced in various Chinese papers. China Mobile quickly denied that claim and said the two companies were still working on a deal. In fact, many analysts speculated that China Mobile itself was likely the source of the report and was using the rumor as an attempt to win concessions from Apple.

"(China Mobile) knows that Apple is talking to all the Chinese carriers," Blackfriars' Carl Howe speculated a few months back. "So it spreads rumors that the talks have broken down and seeds another rumor that it is bringing in Blackberries for its customers instead."

Apparently, the attempt didn't work. As many analysts have noted, playing hardball with Apple remains a risky endeavor. The company is notorious for dictating terms and then refusing to budge when dealing with outside parties. Yet the fact remains that China and its estimated 300 million mobile subscribers (a number that will grow to 500 million over the next few years) would have been a huge market for Apple. As we noted before, if Apple did land a deal with the mobile provider, it could have been one of the biggest drivers iPhone sales to date.

For that reason, China Mobile may have believed it had a bit more leverage at the negotiating table.

In light of Monday's announcement, focus has now shifted to China Unicom. Market watchers and analysts both seem to think that breakdown in talks between Apple and China Mobile is good news for the company's closest rival. As a smaller company, China Unicom may also be more willing to bend to Apple's demands.

The dissolution in talks also highlights another important fact. Namely, that Apple thinks it doesn't need China to hit that 10 million iPhone mark by the end of the year. Put simply, Apple's willingness to simply give up on a deal with China's largest mobile operator could point to a successful holiday season here in the U.S. for the iPhone, as well as healthy sales in Europe.

Steve Jobs is expected to announce current iPhone sales figures tomorrow at the Macworld keynote.

Nokia to use Chinese 3G technology

TD-SCDMA back-end hardware sales near $1bn in first quarter

Nokia will begin selling phones based on China's TD-SCDMA technology next year, according to local press reports.
The world's largest mobile phone maker expects to have handsets available during the first half of 2008.

TD-SCDMA is China's home-developed 3G standard. The government has strongly backed the standard in an attempt to reduce China's reliance on expensive foreign technology.

However, the rollout of 3G phones in the country has been delayed for years while bugs in TD-SCDMA are ironed out.

Although 3G networks have still not been officially launched in China, the market for TD-SCDMA equipment reached $910m in the first quarter of 2007, according to research firm Analysys International.

The spending is believed to be almost entirely devoted to infrastructure, as 3G handsets are not yet on sale.

Local firms ZTE and Datang are leading TD-SCDMA sales with 46.3 per cent and 26.8 per cent of the market respectively.

TD Tech, a joint venture between China's largest mobile manufacturer, Huawei, and Europe's Nokia and Siemens took only 14.8 per cent.

The hardware sales reflect the actions of the world's largest mobile carrier, China Mobile, which recently doled out TD-SCDMA infrastructure contracts for six major cities, including Beijing and Tianjin, which both have populations over 10 million.

These 3G networks, despite their size, remain off limits to the general public as the government has yet to grant 3G licences.

Trial networks based on the foreign W-CDMA and CDMA2000 3G standards were established last year, and are still awaiting government approval to start public operation.

In related news, Nokia has announced the establishment of a research facility at Beijing's prestigious Tsinghua University.

"In some ways, the future of mobile technology is the future of all technology in China," said Professor Niu Zhisheng of Tsinghua University.

"The country has set itself the goal of developing indigenous innovation and, with four times as many mobile subscribers as internet users, the opportunities within mobile technology are clear.
"In addition, a world class communications network is essential to breakthroughs in all areas of science and technology research, rendering mobile technology doubly important."