iPhone coming to China this year

Mobile carrier Unicom confirms deal

BEIJING -- Apple's iPhones will go on sale this year in China, the world's largest mobile market, its partner China Unicom confirmed Friday, after the country's No. 2 mobile carrier posted first-half profits that fell 45% yet beat expectations.

Unicom's announcement of the deal ended months of rumors about a tie-up with Apple, which has been trying to bring the iPhone to some of China's nearly 700 million mobile subscribers.

"This will provide users with brand new communication and information experience," chairman and CEO Chang Xiaobing said in a statement.

China Unicom said the iPhone would be available for sale in China starting in the fourth quarter.

However, many analysts were skeptical of the impact on the bottom line for China Unicom.

"The financial impact of selling the iPhone is limited for China Unicom," said Yuanta Securities in a report dated Aug. 21, citing the small target market for expensive smart phones, the absence of a WiFi function and the high subsidies that the company may have to pay to attract users.

Unicom made the announcement as it said its profit in the first half of the year fell 45% to 6.62 billion yuan ($969 million) from 12.09 billion yuan. Seven analysts polled by Reuters had forecast a profit of 6.2 billion yuan.

The company is also struggling to integrate fixed-line operator China Netcom, which it absorbed last year as part of an industrywide restructuring designed to increase competition by creating three major carriers.

China Mobile, the world's largest mobile carrier, China Telecom and Unicom are in the middle of a three-year $58.5 billion spending spree through 2011 to build their 3G networks.

In a sign that subsidies for handsets could be more expensive than carriers had previously planned for, China Telecom said on Thursday it was increasing its budget for subsidies to 37% of wireless revenues from 30%.

China is the world's largest wireless telecom market, but a large majority of phones are inexpensive models.

The company said its monthly average revenue per user, a key indicator of profitability, for its mobile services fell 41.7 yuan, from 43.6 yuan a year ago.

Unicom is in the middle of a two-year $14.6 billion spending plan to build its wireless network, while spending is backloaded for this year as the 3G rollout is scheduled for the second half.

China Unicom shares rose 23.9% in the second quarter, beating the 20.9% gain by China Telecom and 15.0% rise in China Mobile.

However, all three lagged the 35.8 jump by Hong Kong's China enterprises index over the same period.