Apple Sets Iphone Customers Free

Apple's negotiations with China Mobile have been bumpy, says Edmund Hung, a telecoms analyst at Maverick China Research in Beijing. In the United States and European countries, Apple successfully pits market leaders against each other. The telecoms that won iPhone exclusivity—AT&T, O2, Orange and T-Mobile—now pay Apple a significant (and undisclosed) percentage of revenue from iPhone users. Hung says Apple "found out very quickly" China's telecoms would not pay nearly as much. China Mobile commands more than 70 percent of the market. Its sole competitor, China Unicom, is probably too small to ignite a serious bidding war for iPhone service.

Slow iPhone sales in Europe have emboldened China Mobile and other telecoms to drive a hard bargain with a weakened Apple, says Neal Mawson, a telecoms expert at Strategy Analytics, a market-research firm in Milton Keynes, England. Mawson says China Mobile has been "balking" at Apple's revenue-sharing proposals.

Apple is not abandoning exclusivity arrangements, which are expected to be rolled out in many countries this year. (Apple's U.S. contract with AT&T is expected to last four more years.) But Dan Moran, an editor at Macworld, an independent San-Francisco publication, says the company's new telecom strategy will likely increase iPhone revenue. It will also quiet critics who say Apple has exhibited an "its our way or the highway" approach to the iPhone, he says. And it may even help to quiet consumers who have accused Apple of selling "monopoly phones."

© 2008