When evaluating how China Unicom’s service tethered with the iPhone will fare out there are a few challenges to consider. We did confirm with a friend at China Unicom that they are preparing for the iPhone release as early as September.
The Price
Unfortunately the iPhone is out of reach for most people in China, where the average income for a recent graduate is around 2500 rmb ($375 usd) per month. About 1-2 million iPhones seems like a good starting point for well off people living in Beijing and Shanghai which has a combined population of almost 40 million people.
There may be over a million iPhones on the mainland smuggled in from the United States. The American iPhone 3GS has been selling for 6000 rmb – 6500 rmb on the gray market while the unlocked Hong Kong or Italian version fetches a price between 7000 rmb and 8500 rmb. There’s also the LPhone which is the latest Chinese imitation that sells for around 777 rmb.
AppleInsider reports that it is rumored China Unicom is paying around 3000 rmb to Apple for the iPhone and will offer new subscribers a handset below that price. Since it seems China will most likely be getting a modified version of the iPhone that is much cheaper then the current models readily available, it should help foster more sales.
The Contract
Most cellular customers are usually on a pre-paid plan with their service provider. While China Unicom also offers prepaid plan, their 3G service is stricly by 6 month contracts. Since the credit ratings system in China is still under development, they will be charging a deposit to new subscribers. A new contract for a 3G phone number in Beijing is currently 1000 rmb for non-Chinese citizens, 500rmb for non-Beijing citizens. Native born Beijingers in Beijing do not have to pay a deposit. I suspect the iPhone will have some type of deposit for all buyers.
Revisiting the price issue, China Unicom’s 3G service is also very expensive for many locals to afford. Having a China Unicom 3G number which begins with the prefix ‘186′ can even be seen as a status symbol. The lowest price plan they currently offer is 186 rmb/month which buys you 510 outgoing minutes, 20 video phone minutes, 20 MMS, and 40 downloads for articles from their online store. The 3G service at that price point is limited to only 60MB/ month. In contrast, China Mobile offers 500MB of GPRS Edge for only 50rmb. Most people in China on the average spend only 50rmb/month for their entire plan. Most students in the country spend only half that. Free incoming minutes are the norm for both service providers.
Speculation
If you are considering investing in China Unicom, the first solid speculations of China Unicom receiving the Apple contract surfaced around April where the stock sold for under $10 usd/share. Since speculation the stock has increased to todays stock price between $14 and $15 usd/share. Although some investors may be behind the curve, 1 to 2 million new subscribers isn’t much of a dent compared to their total 125 million subscribers. Another problem to consider, it is just plain difficult to track down a China Unicom location, whereas China Mobile is sold and available on almost every block with official, licensed, and unlicensed stores.
I believe many people will find that an iPhone under 3000 rmb is a bargain and will probably make the switch to China Unicom. However Unicom’s service is so expensive they may be willing to lose their deposit and jailbreak it for use with China Mobile. Furthermore, since 3G is very new in China, it is difficult to measure 3G customer satisfaction. Once the 3G fad goes down and if Unicom can recoup the expenses of setting up a 3G infrastructure, their prices may go down.
Please share your thoughts with us.
