Apple (NSDQ: AAPL) may look to China Unicom to launch the iPhone in China, which would have its pluses and minuses for the company. The third round of discussions between Apple and dominant player China Mobile broke down over who would control the iPhone App Store—previous rounds had broken down over China Mobile paying Apple a slice of service revenues and the price of the handset. The Fortune Apple 2.0 blog quotes some Chinese publications as saying that Apple is now in talks with China Unicom, the second largest carrier in China, and the iPhone may be available as early as May 17. Although, the article does note that the talks “have stumbled over some of the same issues as the China Mobile talks — including government restrictions on cell phones with integrated Wi-Fi”.

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The downside for Apple is fairly obvious—China Unicom has “only” about 130 million subscribers compared to China Mobile’s 415 million. Of course, this gives Unicom more incentive to launch a handset which may draw subscribers away from its rivals. There is a relatively recent upside—China Unicom will be rolling out a 3G network based on the WCDMA standard, which Apple uses in the iPhone, while China Mobile will be rolling out a TD-SCDMA network, which nobody uses. The companies don’t get much of a say in this, it’s government mandated, although it’s interesting to note that Unicom is reported as planning to launch its network on May 17, indicating it has been building and preparing for a while. The 3G licenses weren’t issued when Apple began negotiations—and there was no 3G iPhone either.