Details of iPhone Negotiations Between Apple and China Mobile Emerge

Interfax reports on details of the lengthy negotiations between Apple and China Mobile over bringing the iPhone to China. According to their source, China Mobile president Wang Jianzhou revealed in a recent visit to the China Mobile Research Institute that talks between the two companies have broken down three times over the past year and a half.

The negotiations, which have reportedly involved both Steve Jobs and Tim Cook, initially stalled over Apple's request that China Mobile share 20-30% of their monthly iPhone revenues with Apple. While this business model was initially utilized in the United States with AT&T and the original iPhone, Apple has shifted away from revenue-sharing deals with carriers to more traditional arrangements involving handset subsidies. Apple and China Mobile, however, were also unable to come to an agreement on subsidies, with China Mobile objecting to Apple's demand that the carrier pay $600 per iPhone.

The most recent round of talks has broken down over Apple's App Store and China Mobile's reluctance to relinquish their tight control over China's mobile Internet offerings.

The third and final round of negotiations also broke down over Apple's insistence that it, rather than China Mobile, sell iPhone applications directly to customers via its online store. Wang saw the offer as a threat to China Mobile's dominance of China's mobile Internet industry, as Apple rather than China Mobile would collect money directly from customers under the deal.

"Wang said China Mobile should operate the application store itself in order to maintain its advantage," the source said.

Wang also pointed out that iPhone users in other parts of the world pay for applications by credit card, a model which would not be successful in China, where users prefer to pay through deposits in their mobile phone accounts. Under the latter arrangement, China Mobile would have to play a part in administering the purchase of iPhone applications in China, the source said.

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