China Unicom's 3GS price cut

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China Unicom, which has been having difficulty meeting demand for Apple Inc's iPhone 4, slashed the price of the iPhone 3GS by 20 percent on Friday.

It's a move that analysts said may divert consumers' demand for the iPhone 4, and attract more users to the third-generation (3G) mobile system.

The company, the official telecom carrier that offers iPhones in the Chinese market, cut the price of the iPhone 3GS with 8 gigabytes of memory by 1,000 yuan ($150) to 3,999 yuan.

Industry experts said the price change means that China Unicom is attempting to attract more 3G users and relieve demand for the iPhone 4.

Users who sign a two-year-contract with the company will also get a refund of as much as 3,792 yuan in phone charges.

China Unicom introduced the WIFI version of the iPhone 3GS in August 2009, as it rolled out its 3G communications network for the first year.

Lu Libin, an analyst at the Beijing-based research firm Analysys International, said fewer than 1 million official iPhone 3G and 3GS have been sold since China Unicom introduced Apple's handsets into the Chinese market, so the price cut was not only aiming at attracting more 3G users but also at reducing the iPhone 3GS inventory.

"But the sales of the iPhone 3GS were not very good because of its late launch in the Chinese market, and robust grey-market sales due to lower prices," Lu said. "After China Unicom launched the iPhone 4 this year, the iPhone 3GS attracted less attention from users."

"The iPhone 3GS price cut will give 3G users more options for handsets, which are priced between 3,500 yuan and 5,500 yuan," said Lu. However, he also pointed out that the method won't enhance the sales performance of the iPhone 3GS in the long term, "because the iPhone 4 shortage will be eased later on, and most iPhone users still want to buy the newest model".

According to a report by Southern Metropolis Daily following the Chinese launch of the iPhone 4 on Sept 25, about 600,000 units of iPhone 4 have been shipped and 100,000 orders have still to be fulfilled.

In order to attract more 3G users, China Unicom allowed its stores to sell the iPhone 3GS without signing a service contract, which is compulsory for the iPhone 4. "I don't want to wait a month to receive the iPhone 4, so I booked online," said Wu Quxiang, a China Unicom user in Beijing. "So if there is such a big difference in the price, I may consider buying the iPhone 3GS instead, because for me the reason for buying an iPhone is the applications."

"China Unicom is seeking a way to promote its 3G user number, and its killer attraction is the iPhone," said Lu.

By the end of the third quarter of this year, China Unicom had 10.6 million 3G users, while China Mobile had 15.3 million and China Telecom 9.2 million.

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