Apple, China Mobile enter talks

HONG KONG (Reuters) - China Mobile said it hoped to launch Apple iPhones soon to accelerate uptake of high-end 3G services as it reported first-half profit at the top end of expectations.

The world's largest mobile operator by subscribers said it has met with Apple chief executive Steve Jobs several times on introducing an iPhone based on its home-grown TDSCDMA network standard.

The companies hope to launch an iPhone as soon as possible, China Mobile's Chairman Wang Jianzhou said, without giving any timeframe.

Though China has a massive growing mobile market, only 80 million are 3G users, with the rest low-end 2G subscribers who mainly own cellphones to make calls only.

As of end-June, China had 907 million mobile phone users, bigger than the entire population of Europe.

China's three telecom carriers have been battling falling average revenue per user (ARPU) as they offer aggressive subsidies to widen their user base in the world's biggest mobile phone market.

China Mobile, China Unicom and China Telecom Corp Ltd are trying to attract 3G and smartphone users by offering subsidized handsets from Apple, Samsung Electronics and HTC for multi-year contracts.

So far, China Unicom is the only carrier to offer iPhones.

"Even if China Mobile strikes an agreement with Apple to sell iPhones, that may not translate to more profitability in the near term because it will create more intense competition," said Patrick Shum, president of BMI Funds Management.

"The telcos will try and undercut each other by offering more subsidies," he said.

China Mobile's ARPU per month in the first half was 70 yuan, down from 72 yuan during the same period a year earlier, with CEO Li Yue expecting ARPU to fall further in the second half.

PROFIT UP

China Mobile, which had 616.8 million subscribers as of June including 35 million 3G users, reported net profit rose 6.3 percent to 61.3 billion yuan ($9.6 billion) for the six months ended June, compared with a forecast for 59.8 billion.

First-half profit growth was the fastest since an 18 percent increase in the second half of 2008.

Shum from BMI Funds Management said China Mobile's prospects were better than the other two Chinese operators in the long term because of its plans to roll out 4G-LTE (long term evolution) network.

"China Mobile has the most ... subscribers and that will improve its bottom line if it rolls out a more advanced technology compared to its other competitors," he said.

The operator already has 7.44 million iPhone users on its network, even though it did not sell the smartphone through its retail network, China Mobile executives said at a news conference after the release of its results.

Apple currently does not support China Mobile's network and iPhone subscribers using the carrier do not have access to 3G download speeds.

"I met Steve Jobs several times already, but we haven't come to an agreement yet," China Mobile's Wang told a news conference. "All I can say is, it's a common wish of China Mobile and Apple to come to an agreement as soon as possible."

Smartphones account for just a fraction of the country's mobile-phone market, prompting Apple to say it was merely "scratching the surface" in China.

Even though China has a huge number of mobile phone subscribers, the penetration rate is only around 70 percent, compared with neighboring Hong Kong's about 200 percent.

China Mobile shares, which have lost 2.7 percent so far this year, closed down 0.6 percent on Thursday in a broader market that fell 1.3 percent.

(Editing by Chris Lewis, Vinu Pilakkott and Hans-Juergen Peters)

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