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China Unicom offers free iPhone 4S on contract

Want a free iPhone 4S? If you're a customer of China Unicom, you're in luck -- the company announced today (one week from the first day of iPhone 4S availability in China and 21 other countries) that they'll give users a free iPhone 4S for signing a multiyear service contract.

It gets better. The promotion offers the 32 GB iPhone 4S on a three-year contract for as little as 286 yuan (about US$45) per month, or customers can commit for only two years and get the 16 GB model for 386 yuan per month.

Several industry analysts think that the subsidy, which is designed to attract high-end subscribers who will also buy up expensive data plans, is a bad idea for China Unicom. Hong Kong-based analyst Steven Liu of Standard Chartered Bank noted in a Bloomberg article that "After subsidizing the iPhone, the operator will have less money for subsidizing other smartphone users that could be more profitable."

China Unicom's costs for 3G phone subsidies and related marketing expenses were nearly 6 billion yuan in the first half of 2011, almost four times the same period in 2010. The popular iPhone handsets are sure to hit the carrier's subsidy costs even more, but customers don't appear to want to purchase lower priced and less capable smartphones.

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