The deal we predicted yesterday has come to pass: Apple (AAPL) has announced a deal with China Unicom, China's second-largest cell-phone company, to resell iPhones. But this deal is not nearly as sweet as Apple's deal with AT&T (T): China Unicom will buy iPhones at a wholesale rate, then resell them, with no revenue share for Apple.
But the really key issue here is likely one of network effects. If the China play goes as big as Apple hopes, and China Unicom customers rapidly adopt the iPhone-centric iTunes hub for purchases of applications, perhaps Apple can make itself a dominant player not only in the global smartphone market but also in the battle to control the use of the mobile Internet.
Apple is already halfway there. iPhone users in the U.S. suck up the majority of mobile-Internet usage minutes. Perhaps not coincidentally, Apple, among all the large PC makers, has sustained its sales and not seen massive drop-offs. So imagine the potential for an Apple iPhone halo effect in China -- the largest PC market on Earth, and one with a rapidly growing middle class that has enough money to spend on pricey brand-name goods. One thing is certain: This deal can't be a bad thing for Steve Jobs and company.
The numbers are very good for Apple. Wall Street analysts, according to ComputerWorld, estimate that Apple will sell between 5 million and 7 million iPhones in China in 2010, comprising as much as 20 percent of Apple's worldwide iPhone sales. And that might be just a taste of the numbers Apple could ring up in China. Partner China Unicom has 140 million subscribers; China's largest carrier, China Mobile, has almost three times as many.
That said, China Unicom in some ways is actually a better fit. Only one fifth of China Mobile's subscribers are "post-paid" customers, meaning they pay after they use services each month. The other customers are the in the less-lucrative "pre-paid" category: they pay a flat rate for a fixed amount of services. But roughly half of China Unicom's subscribers are post-paid.
China Unicom has also been beefing up its 3G data networks: essential for iPhone subscribers to use their phones easily for such data-intensive activities as Web surfing and apps. When the phones start selling this year, it will be easy to tell from early-adoption rates what path this deal will take, and whether Apple will rapidly become a big player in the world's biggest market.
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