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What about the “Verizon” of China?

Ever since the iPhone’s initial launch on AT&T in 2007, its exclusive carrier agreement had left millions around the US wondering when or if the world’s hottest smartphone would ever arrive on their carrier of choice. These questions were made worse as many found AT&T’s 3G service unable to withstand the torrent of information suddenly going through its system. iPhone lovers in the US soon began spreading what would become one the most rumored questions surrounding iPhone news…”When will Verizon get the iPhone?”.

Now that the request of millions has finally come to fruition through Verizon’s announcement of the CDMA iPhone4, we’ve learned a lot, not only about Apple, but more importantly the strategy it adopts in dealing with carriers of its phone.

This brings to light the question of parallel developments playing out in China. The major carrier, China Mobile, was denied a lucrative iPhone deal, while a ‘secondary’ player, China Unicom, received the rights to sell the phone and has since reaped the rewards (both monetary and in Chinese 3G subscriber market share). The same characteristic Apple-favoring-the-underdog scenario has played out with carriers in other countries around the globe. But now, international ‘big dogs’ have been given newfound hope with the CDMA iPhone.

But given these new changes, is there any reason to think that the other two of the three major Chinese carriers will ever see an iPhone on their shelves? To answer this question we must first figure out a few things:

1) Was an exclusive deal struck up with China Unicom? If so when does it expire?

2) Was Apples decision to launch on China Unicom just a matter of compatible standards (WCDMA, CDMA, TD-SCDMA)?

3) Would Apple be willing to give into China Mobile’s constraints/restrictions?

4) Does Chinese market care about iPhone?

In a move that was uncharacteristic of Apple, the 2009 Apple-China Unicom iPhone agreement was a non-exclusive one. This hints that Apple may have had intentions to branch out to other Chinese carriers, but as of yet still has not. Could it have had problems dealing with policies unique to the other carriers or were mobile phone standards in China too much for Apple to handle?

Either way, as we are nearing the end of the 3year deal, it seems Apple is free, and likely very willing, to expand its offerings in China through other carriers.

Although Apple would be happy to get a larger chunk of China’s huge number of smartphone users, it can only do this if it has access to the largest carriers, and there is no carrier in China larger than China Mobile. Unfortunately for Apple, China Mobile uses the exclusive-to-China TD-SCDMA standard for 3G transmissions. It has been rumored that China Mobile pushed hard to get Apple to make an iPhone that would be TD-SCDMA compatible, and Apple pushed just as hard back, but no agreement was made. In order to get a truly large foothold in China, Apple has to find a way to work with China Mobile.

On another hand, things are looking positive for China Telecom. Before Verizon’s announcement, the two companies were in the same boat, having adopted CDMA, but just as unlikely to get the iPhone. But now that a CDMA iPhone is available, and it seems Apple has intentions to ship them internationally, with no exclusive agreement impeding them, China Telecom is perfectly poised to be Apple’s next step further into China’s smartphone market.

Now that the unlucky guy in this situation seems to be China Mobile. How will they respond? Let’s say even if, hypothetically, China Mobile were to suddenly give up TD –SCDMA for either of the other two iPhone compatible standards could Apple handle the rules, regulations, or overall bureaucracy that comes with association with the largest, government backed carrier? If not it would not be the first to do so.

But history has told us that Apple time and time again prefers to be in control, having carriers submit to its will, so it is unlikely to ever be pushed into an unfavorable situation in the first place, even with such a huge user base at stake.

If Apple were to turn its back on China Mobile, and thus the majority of Chinese mobile users, would anyone notice? Things in China tend to keep rolling even when major players ignore it So with 70% of mobile market share and smartphone usage still at initial growth stages, iPhone absence from the largest carrier could become an opening for other smartphone providers to take a hold. With Nokia phones already well established, and Android taking off, this could be a boon for Apple’s long-term plans in China.

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