China Unicom, the country's second largest wireless carrier, has reached an agreement with Apple as its sole iPhone partner in China for three years, and Apple's 3 G iPhone will be sold by the end of September, the ccidnet.com reported on Tuesday.
Under the agreement, China Unicom will purchase iPhones from Apple for 3,000 yuan each and guarantee annual sales of 1 million to 2 million units and at least 5 billion yuan ($732.1 million) in annual revenue, the newspaper said.
The agreement comes after an apparent breakdown in negotiations between Apple and China Mobile, China's largest carrier, over revenue sharing and bonus arrangements.
Insiders of China Mobile revealed that Apple hopes China Mobile to offer a very high percentage of revenue sharing and bonus. He also said that Apple insists on selling application programs of iPhone through online stores.
According to the insider, China Mobile rejected Apple's request for a revenue sharing as high as 20% to 30%.
Analysts said that China Unicom, with 133 million customers, is a definite second fiddle to China Mobile, which has 488 million customers.
By comparison, Verizon Wireless, the biggest mobile carrier in the U.S., claims more than 86 million customers.
China is clearly a big opportunity for Apple, said Shaw Wu, a Kaufman Bros. analyst. Apple sold 5.2 million iPhones in 80 countries in the most recent quarter, but the must-have gadget still isn't available in China - at least not officially, Wu wrote in a recent research. a
Wu predicted Apple was on track for a China deal by the end of the year.
Apple's way to China has been paved as there are a lot of Chinese wireless users who are already familiar with the iPhone through various unlocking schemes, meaning it might not have to do as much advance marketing.
Partnering with China Unicom would give Apple another advantage in that it wouldn't have to modify the iPhone's current wireless chip.
China Mobile is rolling out a 3G network based on a proprietary homegrown wireless standard, while China Unicom and China Telecom--players two and three in that huge market--are using the same WCDMA technology that other GSM-based carriers like AT&T are using.
As of 0642 GMT, China Unicom shares were up 1.4% on the Hong Kong Stock Exchange.