Various issues expected to delay iPhone debut in China

Specifically, there's a precedent among Chinese telecom operators that they do not, under any circumstances, agree to share their revenues with outside parties, as Apple has requested of and achieved from all of its iPhone partners thus far.

"[O]ur business model does not entail sharing revenue with terminal producers — we don't share revenue. That's a Chinese rule," one executive told Reuters on condition of anonymity. "All it is right now, on the iPhone and Apple, is that the firm welcomes their approach."

Secondly, and possibly more crucial, is the fact that iPhones might be incompatible with the Chinese market because of their "locked" SIM cards — meaning the device would not be able to piggyback on another operator's network.

"You have to realize Chinese SIM cards are not locked up, as the iPhones' are," the executive said.

Still, word of the talks sent shares of China Mobile, which has 349.6 million subscribers, as well as smaller rival China Unicom, which caters to 156 million users, soaring on Tuesday. China Mobile shot up 9.23 percent to close at HK$140.80 ($18.08), while China Unicom Ltd. rose 6.19 percent to HK$15.44 ($1.98).

And while China Unicom said it it has no immediate plans to bring the iPhone to China, it remains open to the idea.

"Right now, we don't have any plans to introduce Apple's iPhones in China," Unicom Executive Director Li Zhengmao told reporters on Wednesday. "But of course, we're always willing to discuss a good business opportunity if it presents itself."

Zhengmao said he could not predict whether the iPhone would gain widespread adoption in China, but said it would need to support text messaging in Chinese language to be accepted.

At (US)$400, the Apple handset also currently costs more than the average monthly salary in China.

Apple has said it hopes to launch iPhone in parts of Asia in 2008.