Regarding Apple’s Direct Sales of Unlocked, Contract-Free iPhones in Hong Kong

Tuesday, 30 September 2008

Last night I asked what the deal is with the new unlocked iPhones Apple is selling in Hong Kong. I got a slew of helpful answers from DF readers. Here’s a summary.

First, Hong Kong is far from the only country where iPhones are sold without being SIM-locked to a specific carrier. This table from Apple lists the carriers in the various countries where the iPhone is sold.¹ It’s sold unlocked in the Czech Republic, Greece, Hong Kong, Italy, Luxembourg, Macau, New Zealand, Singapore, Slovakia, South Africa, and Turkey. DF readers in Belgium report via email that the iPhone is sold unlocked there as well, but for some reason that’s not reflected in Apple’s table.

In most (all?) of these cases, selling phones unlocked to a specific carrier is required by law. Here’s the thing, though: Hong Kong is already on that list — Hong Kong is one of the countries where carrier-locked phones aren’t sold.

With these other countries, Apple’s carrier partners sell the iPhones, and even though they’re not SIM-locked, they often still require a contract with the carrier. So in those countries, to get an unlocked iPhone in your hands, you have to go to Apple’s carrier partner, buy the iPhone, and then pay an unlocking fee to get out of the contract. For example, here’s a report from reader Chris Hauserman in Australia:

Today I bought a 16 GB iPhone from Vodafone in Australia. It cost A$363 for the phone, plus AUD$75 to unlock it, on a 24 month contract at AUD$49/month, but I have bought out the remainder of my contract for AUD$25 for 24 months, combined total AUD$1038, or USD$829. Took about 1 hour to deal with all the paperwork in the shop, and I’m waiting for my unlock code to be sent to me tomorrow by email — then I have a new unlocked phone.

Buggered if I know why they don’t just sell it unlocked, hassle for them and for me to go through the process.

This is more or less how unlocked phones in Hong Kong used to work, through Apple’s carrier partner 3 Hong Kong. (Also, there has long been a vibrant market in gray market iPhones in Hong Kong; e.g., here’s a photo from Fredrik Björeman taken in January, showing a kiosk of unlocked (and jailbroken) original iPhones for sale in a Hong Kong gadget market.)

What’s new in Hong Kong is that Apple is now selling unlocked iPhones directly to customers:

On its Hong Kong Web site, the Cupertino, California-based company is advertising direct sales of iPhone 3G, saying people can “buy directly from Apple” and choose their own carrier.

“iPhone 3G purchased at the Apple Online Store can be activated with any wireless carrier,” it said on the site.

Keep in mind that there is a difference between unlocked and contract-free. Countries where you can buy iPhone 3Gs both unlocked and contract-free include Italy, Belgium, South Africa, Czech Republic, and Greece. But unlike Hong Kong, you can’t buy them directly from Apple in those countries.

The leading theory regarding why Apple is doing this in Hong Kong is that it’s a strategic move in Apple’s ongoing negotiations to officially sell the iPhone in mainland China. Earlier this week came reports that China Mobile is trying to get Apple to sell iPhones without 3G and without Wi-Fi.

So, assuming Apple is not interested in selling crippled Wi-Fi-less iPhones to satisfy China Mobile’s demands, but still wants to profit from the enormous Chinese market, selling unlocked contract-free iPhones in Hong Kong is the optimal way to supply the mainland Chinese gray market.

Here’s a report from reader JG in Beijing on the current state of the iPhone market in mainland China:

When you buy an iPhone 3G here on the black market (and the “black market” is actually just  an electronics store — they have signs up advertising iPhones, there’s nothing underground about it) you have a choice between a US version, a Hong Kong version, and a New Zealand version.  As of last week a US phone was 4,000-something RMB, a HK phone was just over 7,000 RMB, and a New Zealand phone was more than 8,000 RMB.

As I understand it, both the HK and NZ phones are “unlocked”, meaning that you activate the phone simply by connecting it to iTunes.  The US versions require a small device (maybe just a piece of plastic, or maybe a chip?) that you stick in with the SIM card in order to “unlock” the device, which is why they are cheaper.

That was a long-winded explanation, but I wonder if Apple has made the phones available through their website (and not just through their carrier partner in HK) as a part of their bargaining process with the mainland Chinese carriers (i.e., “If you won’t agree to our terms, we’ll just sell unlocked phones directly in HK.”).

The bottom line: Hong Kong is now the one and only country in the world where you can buy an unlocked contract-free iPhone directly from the online Apple Store.