Apple to launch iPhone in China

Apple's iPhone is set to make its debut in China at the end of this year after the U.S. company signed an agreement with China Unicom, the country's second largest mobile operator.

China Unicom said Friday that it would begin selling 3G iPhone in the fourth quarter after the signing of a non-exclusive three-year contract with Apple.

The company said it would not use Apple's traditional revenue sharing model, and would rather pay the group at wholesale basis.

China Unicom said it hoped that the introduction of the iPhone will boost falling profitability.

The company said Friday that first half net profit fell 42.1 percent to Rmb6.62bn ($ 969m) in mid-heated competition, while revenues fell 4.3 percent to Rmb74.51bn.

Chang Xiaobing, Chairman and CEO, said he expected the iPhone to lure more advanced users who spend more on data services.

"The iPhone will help us to change the structure of our customer base and improve the [average revenue per user]," says Chang.

The news ended months of speculation about a partnership between the two companies will open up a huge new market for Apple, which has sold an estimated 26m iPhones.

The move will make China Unicom and Apple in direct competition with China Mobile, which is set to launch a series of smart phones based on Google's Android operating system.

The world's largest mobile telecommunications company, subscribers will launch smart phones made by Dell, American computer manufacturer, Lenovo China and Taiwan's HTC.

China Telecom, meanwhile, is in talks with Research In Motion, the manufacturer of the BlackBerry and Palm devices offer.

I'm afraid of marketing expenses for the entire industry will grow because of this, "said Marvin Lo, analyst at Daiwa Securities.

Analysts asked how much of a boost the iPhone will lead to China Unicom as a gray-market iPhones are not bound to one operator is widely available.

Analysts estimated 1m-2m iPhones in use in China, which has almost 700 mobile users.

Sandy Shen, an analyst with Gartner, a research firm, says that although the gray-market imports had proven to be popular among some wealthy clients, many users complained about the nuisance as well as Chinese characters in their phones, a serious disadvantage in Mainland China was text messaging is hugely popular.

If the iPhone does not prove a hit in China, analysts say, could revive the Apple brand in the country. Apple's Mac computers are rarely seen on the mainland.