China Unicom Aims for Rival's Gray-market IPhone Users

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China Unicom, which is set to launch the country's first official iPhone sales this week, will look to snatch up subscribers from rival China Mobile by offering 3G service to users of gray-market iPhones.

China Unicom will let users buy a service contract for any handset that supports the 3G standard being used by the carrier, WCDMA (Wideband Code Division Multiple Access), a customer service representative said by phone Monday.

The policy could help China Unicom steal a large number of users from China Mobile, which is the biggest carrier in the world by subscribers and is promoting a China-developed 3G standard in competition with its rival. Unlocked iPhones and other handsets are widely sold at Chinese electronics markets and are most often used on China Mobile's 2G network, which uses the GSM and GPRS standards. There are already about 1 million iPhones in China, consultancy Ovum estimates.

Chinese media called the China Unicom plan an "amnesty policy" for iPhone users. Gray-market iPhones have advantages over the China Unicom versions including support for Wi-Fi, which Apple removed from official iPhones to comply with Chinese regulations. The gray-market handsets are also cheaper, selling for around 4,000 yuan (US$587). By contrast, the cheapest model sold by China Unicom, the 8GB iPhone 3G, will cost 4,999 yuan with no service contract.

Apple's deal with China Unicom does not limit it from seeking other distribution partners for the iPhone in China, and China Mobile has said it is still in iPhone talks with the U.S. company.

Hon Hai Precision Industry, a major contract manufacturer of Apple gadgets, may also sell the iPhone in China through a local distributor it holds a stake in, one analyst said.

Hon Hai, also known by the trade name Foxconn, has an informal agreement with Apple to sell iPhones at retail chain CyberMart, said Zhang Jun, an analyst at stock research company Wedge MKI, citing sources at Foxconn.

The iPhones would be sold unlocked, allowing buyers to use them on either the China Mobile or China Unicom 2G networks, Zhang said. Foxconn expects to start sales in the second half of next year, he said.

A Foxconn spokesman declined to comment on any plans to sell the iPhone. Apple did not reply to a request for comment.

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