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For China Telecom, getting the iPhone changes the rules

By: Emerging Money
Posted: 7/14/2011 9:21:00 AM
Referenced Stocks: AAPL;CHA;CHL;CHU;ZTCOY

After years of slow negotiations, China Telecom is reportedly on the edge of bringing Apple's iPhone to its 106 million wireless subscribers. Time to rethink the Chinese mobile group. Reuters, quoting unnamed sources, is reporting China Telecom ( CHA , quote ), is expected to start selling the iPhone by the end of the year. The company is the smallest of the big three cell carriers in China, with maybe 12% of the overall market. Those subscribers tend to be wealthier and more technologically sophisticated than the people who have signed up with either rural specialist China Mobile ( CHL , quote ), or middle-market China Unicom ( CHU , quote ). Despite its smaller size, China Telecom has sewn up a quarter of the country's still-booming market for 3G data subscribers. And having Apple's ( AAPL , quote ) iPhone as an additional temptation may help the company boost its appeal to China's smartphone fans. China Unicom has had the iPhone for two years, but it was only last quarter that the device started to sell in quantities significant enough to push the needle on its bottom line. Apple says iPhone sales in China are up 250% year over year, largely due to soaring demand for a stripped-down $49 version. That might be why China Telecom is finally coming to the table to sell iPhones as well. And there are even rumors that China Mobile -- formerly shut out of the Apple universe because its network uses the TD-SCMDMA version of 3G -- could have a prototype no-frills iPhone of its own coming soon. If so, the playing field between the three companies might be leveling out when it comes to smartphone adoption. Naturally, the real winner here is AAPL: Meanwhile, the success of the $49 iPhone takes away an incentive for China Unicom to support homegrown smartphones from local manufacturer ZTE ( ZTE , quote ). That stock has been flat at best as its product simply failed to compete: