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China Mobile, iPhone deal hindered by commercial, technical issues

China Mobile is the world's largest mobile carrier, and for Apple, the company represents a way to revive slumping sales in its second largest market. While both companies would benefit from having the iPhone on China Mobile's network, a number of commercial and technical issues have made that impossible. However, those barriers may be coming down in the near future, paving the way for Apple's flagship smartphone to run on the China Mobile network.

The main technical issue facing Apple is that existing iPhones cannot work on China Mobile's TD-SCDMA 3G networks, nor can they operate on the rather rare TD-LTE 4G networks that the carrier is planning to deploy. As for the commercial issue, it's simple -- China Mobile doesn't want to commit to the cost of marketing and subsidizing sales of the iPhone.

Both issues may be resolved if Apple introduces a new, lower-cost iPhone for emerging markets on September 10. The company is expected to be using new Qualcomm chips in the next-generation iPhones that can operate on just about any network, keeping Apple from having to create a special line of iPhones just for China Mobile.

In addition, a lower-cost iPhone would make subsidies much more palatable to China Mobile, a company that desperately needs data-hungry smartphone users to pump up its revenues. Net profit for China Mobile has only risen 15 percent since 2008, and a flood of iPhone users could bolster the company's fortunes, much as it has for US carriers.

Anand Ramachandran, an analyst with Barclays in Singapore, was quoted by Reuters as saying, "The circumstances and the issues that were a hindrance in the past seem to be getting resolved. So I think there's a higher probability that potentially there's something in the works." The announcements on September 10 could foretell an auspicious future for Apple and China Mobile.

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