UPDATE 1-China Unicom in talks to sell Apple iPhone in China

Tue Mar 3, 2009 11:16pm EST

(Updates with analyst comment, background)

By Joanne Chiu and Langi Chiang

BEIJING, March 4 (Reuters) - China Unicom (Hong Kong) Ltd (0762.HK) chairman Chang Xiaobing said on Wednesday the company was in talks with Apple Inc (AAPL.O) to introduce the iPhone to China.

"We are in talks with many handset suppliers, including Apple," the chairman told reporters.

Rival China Mobile (0941.HK) was negotiating with Apple to sell the iPhone in China, but has so far not announced any agreement.

China Mobile chairman Wang Jianzhou also said on Wednesday his company would continue to talk to Apple and he would not comment on the discussions between China Unicom and Apple.

"3G users will account for 20 percent of all mobile phone users in China in the next three years," Chang said on the sidelines of a meeting of the parliament's advisory body.

Analysts said the possible Apple deal may not necessarily be an earnings catalyst for China Unicom given that the Apple brand is not particularly strong in China and there are various local copies of the product available in the market.

"iPhone copies (i.e. the Hi-Phone) are available without (users) having to sign long-term contracts," JP Morgan analysts Jimmy Cheong and Tim Storey said in the note.

"iPhone is likely to be highly subsidised and China Unicom may give away large revenue share so earnings upside is possibly limited, in our view. We think this is a reason why China Mobile has refused to sign with Apple to date."

Moreover, many people in China already use actual iPhones that have been brought in through private channels even though they have not been formally introduced in the country. (Additional reporting by Nerilyn Tenorio; Editing by Kirby Chien and Ken Wills)

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