There was a song years ago which went:
First she says she will,
And then she won’t.
She’s undecided now,
So what are you going to do?
So what are you going to do?
That is precisely the situation with China Mobile and Apple. There has been a report in Southern Daily that talks with Apple have stalled. It depends on your definition of the word ‘stalled’, but both sides have issued strident denials. The reason for the news is simply that both side are playing hardball, an area in which both sides are expert.
China Mobile issued a denial that it had terminated discussions which was a bad move because it makes them look as it they have the weaker hand. Executives of China Mobile should not play poker for real money. They would find it an expensive hobby.
At the moment the people at China Mobile will be a tad upset at having to disclose their interest in this manner – it undermines their bargaining position and strengthens Apple’s hand which can bluff that it is seriously talking with the other carriers.
All this has happened in less than three weeks after the first reports that Apple was in talks with China Mobile — the world’s largest cell phone operator with 350 million subscribers — to carry the iPhone in China.
The sticking point: the revenue-sharing model that Apple insisted on — and got — in the U.S. and European market.
It’s impossible to say from the brief report today whether this door is firmly closed or could be re-opened. Best guess is re-opened. This is a game of bluff and counter-bluff.
Henry Blodget has argued persuasively in Silicon Alley Insider that a China Mobile iPhone deal is inevitable. The Chinese market is so big that even if Apple got only a 1% slice of the pie, no revenue sharing and fire sale prices, it could see revenues of $600 million a year. A 5% market share at today’s iPhone prices could bring in $6 billion a year, even without revenue sharing.
That there is demand for the iPhone among Chinese mobile aficionados is clear. Wired early this month reported on the lively trade in black market iPhones, known in China as the "Ai Feng" ("Crazy Love"). The devices are carried back into the country where they were originally manufactured by mules from Hong Kong and sell for as little as $474.
Earlier this week, Chinese wire services reported that rather than relying on the big Chinese distributors to sell the iPhone Apple could sell direct through its stores.
China Mobile boss Wang Jianzhou says his company is continuing to chew the fat (he did not use that phrase but it will do) with Apple to allow it to sell iPhones in China.
Rival Unicom signed a three-year deal last month with Apple to sell iPhones in China later this year.
That deal is "absolutely not exclusive," and China Mobile still hopes to offer iPhones in China, Wang told delegates to the World Economic Forum.
China Mobile claims more than three times the user base of Unicom, which had 141 million wireless users at the end of July.
Negotiations, probably, continue.