Will iPhone Price Hamper China Unicom's 3G Growth Plans?


China Unicom wants to lead the charge for 3G mobile customers in the exploding China smartphone market using Apple's iPhone as its booster shot. But it's facing hurdles already due to what some observers are calling a slow uptake of the just-launched iPhone -- and that it may be just too expensive.

China Unicom's chairman, Chang Xiaobing, told The Wall Street Journal and other publications Tuesday that China Unicom intends to increase its number of 3G customers by at least 1 million a month. If successful, that growth would represent a huge cross-section of China's more than 710 million mobile phone users, and allow China Unicom to better compete with China Telecom, currently the country's No. 1 carrier to Unicom's No. 2.

Unicom will undoubtedly need the help; with Apple rival Research In Motion reportedly about to throw in its lot with China Telecom to bring the BlackBerry to the Chinese market, Unicom's strategy will be closely observed in the coming weeks.

China Unicom expects Apple's iPhone to give it a much-needed boost in that competition, and the company is bullish despite a recent quarterly profit loss and the expenses incurred from having to build 3G networks needed to support the iPhone in China. But according to various reports, the iPhone has been slow off the starting line in China, with crowds described as "subdued" in many Beijing stores, at least in comparison to their American and Japanese counterparts.

Many observers point to China Unicom's iPhone pricing in particular; Unicom is selling the 32-GB iPhone 3GS for the Chinese yuan equivalent (6,999) of about $1,024 without a service contract, and even the low-end iPhone -- the 8-GB model -- runs 4,999 yuan, or $730. The Unicom iPhone also doesn't have Wi-Fi capability -- a potentially fatal omission for a country whose daily Wi-Fi demands are soaring.

Watch for Apple and China Unicom to adjust their Chinese market strategies if the numbers don't ramp up fast. Thanks to the opening of the 3G floodgates in the world's most populous country -- the Chinese government gave 3G operating licenses to China Unicom, China Telecom and also China Mobile at the beginning of the year -- the old rulebook is officially out the window.