May 12, 2010 / 10:44 AM / 7 years ago

UPDATE 1-China Unicom ups iPhone subsidies to boost sales

4 Min Read

* China Unicom raises iPhone subsidies, sees surge in sales

* To spend up to 5 bln yuan this year on 3G subsidies

* China Mobile in talks with Apple to bring iPad to China

* China Mobile wants TD-SCDMA next-generation iPhone (Adds details, quotes)

By Kelvin Soh and Fion Li

HONG KONG, May 12 (Reuters) - China Unicom (0762.HK), China's No. 2 mobile carrier, will raise its subsidies for Apple's (AAPL.O) iPhone that it sells as it aims to boost demand, potentially sparking a price war among operators.

Sales of iPhone have been slow since China Unicom became the first local mobile operator to offer the smartphone in the mainland, raising questions on whether it may be able to hit its target of 10 million new 3G subscribers this year.

"China Unicom has been adding less than 1 million subscribers every month," said Victor Yip, an analyst with UOB Kay Hian in Hong Kong. "They need to add more soon quickly because their competitors are not easing up."

China Unicom added 2.1 million new 3G users in the first quarter of this year to a total of 4.8 million users, slower than bigger rival China Mobile (0941.HK), which added 4.3 million users for a total of 7.7 million.

China Unicom said it will also spend up to 5 billion yuan ($735 million) in phone subsidies this year to attract new 3G customers. This week, the company said it plans to begin selling PC firm Lenovo's (0992.HK) LePhone-branded smartphone.

"Some 3G monthly subscription rates that were going for 96 yuan we have cut to 66 yuan, and that should help grow our subscriber base," Lu told reporters after the company's annual shareholders' meeting on Wednesday.

The increased subsidies have helped sales, Lu said, with the the number of iPhones sold climbing after the price cut.

China's three mobile carriers spent about $21 billion building their 3G networks in 2009, and are eager to recoup that investment by pushing more users towards the more expensive data service, and as revenue from voice calls falls.

China Mobile and Ipad

Earlier, the world's largest mobile operator China Mobile said it was in talks with Apple to bring into China the company's iPad tablet PC, and was in talks with local publishers to provide electronic versions of their books available for download.

China Mobile is also in talks with Apple to develop a next-generation iPhone that runs on TD-SCDMA, the homegrown third-generation mobile standard that the company uses.

"We've been in close contact with Apple all this while," said China Mobile Chairman Wang Jianzhou at the company's annual shareholders' meeting.

"The most important thing for us right now is that Apple works together with us in their next-generation phone to have a TD-SCDMA version as well."

On Tuesday, China Mobile said it had set up a unit in Taiwan that would enable it to complete a long-stalled 12 percent stake in the island's third-largest mobile carrier Far EasTone (4904.TW). [ID:nTOE64A09H] (Editing by Anshuman Daga)

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