Apple, China Mobile call off iPhone launch talks

Apple and China Mobile have called off talks to launch the U.S. firm's popular iPhones in China, dashing investor speculation that the device will hit store shelves soon and sending China Mobile shares down.

Investors had cheered Apple possibly winning access to China Mobile's 350 million subscribers--more than the population of the United States--and news of talks over the device's potential launch in the world's largest telecommunications market helped Apple's stock climb more than 10 percent on November 13.

Shares in China Mobile, the world's largest mobile phone operator, slid nearly 3 percent after Monday's announcement to $16.66 (130 Hong Kong dollars).

Analysts had expected talks to fail at least initially, predicting that both parties would eventually lock horns over revenue sharing and a plethora of technical difficulties.

"It's not a surprise. China Mobile doesn't want to share its nonvoice revenue," said Duncan Clark, chairman of BDA China, a Beijing-based telecommunications research consultancy. "The two have very strong egos and, as in any relationship, that often doesn't work."

The iPhone, a cell phone that allows Internet access and plays music, sells for $399 in the United States.

Experts said last year the iPhone would have to navigate a spate of technical, content, and fee issues unique to China, including a standard revenue-sharing agreement that China Mobile would be sure to dislike, before any launch could proceed.

The iPhone, one of the hottest gadgets to hit stores in the United States and Europe in 2007, might also be incompatible with China because of its "locked" SIM card. That meant it would not be able to piggyback on another operator's network.

"Our parent has terminated talks with Apple over the iPhone," a China Mobile spokeswoman said, confirming several unsourced Internet reports.

Contemplating the next step
Lei would not elaborate except to say that China Mobile had not ruled out reviving discussions at some stage, if necessary.

It is unclear what Apple, which has declined to comment on the issue, planned to do in China next. Apple was not immediately available for comment.

China Unicom, the smaller of the country's two wireless carriers, said in 2007 it had no plans to bring the device into the country, but was open to the idea.

Apart from China, Apple had also initiated talks with NTT DoCoMo and Softbank to bring its multimedia device to Japan, though sources at both firms said revenue-sharing was again a hotly contested issue.

Globally, Apple has chosen France Telecom's Orange, Deutsche Telekom's T-Mobile and Spanish Telefonica-owned O2 in Britain to bring the iPhone--which combines Apple's iPod music player, a video player and a Web browser--to Europe.