By staff reporter Wang Shanshan and intern reporter Wei Ran

From Caijing Online

China Unicom said it is evaluating “many suppliers” to provide phones for its third-generation mobile service, but the contest among China’s telecom providers to land Apple’s iPhone may have already been tilted in Unicom’s favor during last year’s telecom restructuring.

Unicom is China’s government-designated provider of 3G services using the WCDMA technology which the iPhone runs on. Rival China Mobile has put in its own bid with Apple, but reportedly had to break off talks, because of compatibility issues with China Mobile’s TD-SCDMA-based service.

What this makes for is a set of players taking on unfamiliar roles – Unicom in the driver’s seat, Apple trying to extract terms from an effective monopoly, and China Mobile fretting that a domestic competitor may take away what could be the biggest 3G prize of all.

China Unicom chairman Chang Xiaobing told reporters March 6 that the company is evaluating a wide range of handset providers with an eye towards introducing phones that will be “beneficial to the development of 3G, including the iPhone and even the GPhone,” referring to Google Inc’s third-generation offering.

“ In 3G, those who can keep up with consumer preferences will be able to gain more market share,” according to Chang, who was speaking on the sidelines of the Chinese People’s Political Consultative Conference. He did not elaborate on the progress of the talks.

How Unicom ended up with the inside track on the iPhone is a footnote in the saga of China’s transition to 3G, whose many stops and starts appear to have been calculated to give the homegrown TD-SCDMA time to mature and give Chinese technology a fighting chance against the prevailing foreign standards - WCDMA, developed by Qualcomm Inc of the US, and the European CDMA2000.

The awarding of the TD-SCDMA license to China Mobile was widely seen as a move to ensure China’s unproven 3G standard finds wide distribution with the dominant carrier. But analysts also characterized the award as a form of handicap for China Mobile, calling it “asymmetrical regulation,” a means of reining in the company’s market power relative to Unicom and China Telecom, the CDMA2000 licensee.

The precedent of iTunes, Apple’s music service, suggests that Apple extracts advantageous terms from its partners as a way of leveraging the wide appeal of its devices. But it’s unclear it can do the same with Unicom, the company that is looking likely to be the iPhone’s distributor in China.

Meanwhile, a China Mobile source told Caijing that the company is still in negotiations with Apple, suggesting that the Chinese carrier may be attempting a technical fix to resolve the compatibility issue.

The China Mobile source’s remarks run counter to a February report in the Guangzhou-based Nanfang Daily that talks with Apple had broken down due to the compatibility issue.

Chang, the Unicom chairman, also told Caijing that the company plans to invest about 60 billion yuan this year in WCDMA network construction, with commercial trials due in 55 Chinese cities by May 17 and a 3G launch in 284 Chinese cities by the end of the year

Full articles in Chinese: http://www.caijing.com.cn/2009-03-04/110112302.html

                                   http://www.caijing.com.cn/2009-03-04/110112187.html