China Telecom in talks with Apple on iPhone

China Telecom Corp Ltd, the smallest of the country's three telecommunications carriers, is still in talks with Apple Inc to carry its iPhone, targeting growth in high-end users.

China Telecom, which competes with China Mobile Ltd and China Unicom, would only increase handset subsidies if it started selling iPhones to draw more users to use its network, Chairman Wang Xiaochu said.

China Unicom is the only carrier selling the popular iPhone in China, the world's largest mobile phone market, although the two other operators have been aggressively negotiating with Apple to be next.

China Telecom, which has increased capital expenditure to 50 billion yuan this year from 43 billion yuan last year, sees its overall ARPU (average rate per user) trending lower in the second half of this year.

"For voice, we will track our competitors on pricing, but we'll try to maintain our pricing for data. That's because our 3G development is better, so larger data traffic will help raise our ARPU," Wang said.

Its views are largely in line with China Mobile, which said last week that its ARPU would continue to fall for the rest of the year.

China Telecom executives said during the news conference that 3G ARPU for 3G services was slightly above 80 yuan in the first half after introducing the service in the second half of last year.

China Telecom planning iPhone launch later this year

China Telecom Corp Ltd plans to offer its 106 million subscribers the Apple Inc iPhone by the end of 2011, which would make it the second operator to do so in the world's largest mobile phone market.

The move would help China Telecom, the smallest of the country's three telecommunications operators, cement more high-end 3G users in a competitive market in which handset subsidies offered by carriers are squeezing margins. China Telecom operates the country's largest fixed-line network and is a relative newcomer to the mobile market.

"The reason telecom operators are fighting for the iPhone business is because everybody is trying to grab as many 3G users as possible," said Jane Wang, an analyst at UK-based research firm Ovum. "The only way to keep costs down is to build up such a user base."

China Telecom's shares, which have risen by about a fifth this year, extended earlier gains after Reuters exclusively reported the plan, rising as much as 5.5 percent to an intraday high of HK$4.95 and outperforming the Hang Seng Index's 1 percent gain.

Separately, China Telecom said in a statement that its president and chief operating officer, Shang Bing, had resigned to become deputy minister of the Ministry of Industry and Information Technology.

China has 896 million mobile phone users - bigger than the entire population of Europe. Its three telecommunications operators are China Mobile Ltd, China Unicom and China Telecom.

So far, China Unicom is the only operator to offer the iPhone after signing a three-year agreement with Apple in 2009. Its deal with Apple is not based on a revenue-sharing scheme, unlike some operators in other countries. For example, in the United States, Apple has a revenue-sharing agreement with AT&T Inc on iPhone sales.

"Unicom is selling iPhones, but there was no particular boost to their earnings from that," said Patrick Yiu, director at CASH Asset Management. "Even if China Telecom gets the iPhone deal, it will still depend on whether their system can support it and on the details of the contract."

In May, China Telecom's chairman, Wang Xiaochu, told a news conference that the carrier had contacted Apple to launch the iPhone based on CDMA (code division multiple access) technology.
"It's expected to happen this year. China Telecom already has the required technology and it all hinges on the content of the agreement. As we all know, it's not easy to negotiate with Apple," said a source close.

China Telecom is expected to introduce the iPhone in November, said another source.
In June, a media report said bigger rival China Mobile could offer iPhones from September, although analysts said it was unlikely that Apple would support the carrier's TD-SCDMA (time division synchronous code division multiple access) technology.

A more likely scenario was for Apple to support China Mobile's 4G LTE (long-term evolution) technology, which would only be available either in late 2012 or 2013, they said. If that is the case, China Telecom would be next in line to offer iPhones.