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Attempts to secure an iPhone for China Mobile's TD-SCDMA network have resulted in one of the most twisted negotiation sagas in the wireless industry, with the carrier reportedly pulling back from deals at least four times over the past three years, refusing to subordinate its brand to Apple's. That has not stopped the cellco from promoting and selling the famous handset - it just offers it with Wi-Fi only, and has still managed to shift about 5m in four months.

The world's largest operator by subscribers has been advertising the iPhone 4 in its stores and around capital Beijing and is offering gift cards worth as much as CNY2,800 ($441) to customers prepaying for Wi-Fi service. Like many of its peers round the world, Mobile is investing heavily in own-branded Wi-Fi hotspots, as a way to offload data from its 3G network and add value to subscribers. Despite Chinese government restrictions on Wi-Fi web access, usage is booming and Mobile plans to open about 1m new hotspots over the next three years.

Having signed up 5m iPhone customers in the period from May to September, Mobile has almost doubled its user base for the Apple device, to 9.5m. That has helped it increase its market leader over nearest rival China Unicom. In the early days of 3G, Unicom and China Telecom were gaining significant ground on their larger competitor in the mobile data area, because they use industry standard 3G systems with a wide range of handsets. Now, however, Mobile has persuaded many vendors to make smartphones for its TD-SCDMA network and is touting GSM voice plus Wi-Fi data for the gadgets it has not signed up directly.

"They realize this is working," Paul Wuh, an analyst at Samsung Securities, told Bloomberg. "They have 10m people who were willing to buy an iPhone without any subsidy and use it on the 2G network, so now they are just encouraging that by offering this Wi-Fi package." Seven other devices are also included in the Wi-Fi gift card promotion, including models from Samsung, Nokia, ZTE and Huawei.

Apple said in a statement: "We have only one iPhone partner in China: China Unicom" - though the company will be delighted at an additional few million sales involving no financial input from itself. Apple is widely reported to have agreed in principle to make a version of its next iPhone to support TD-LTE, which will be China Mobile's 4G network at some point in the future.

China Mobile has 43.2m 3G users compared with 30.2m for China Unicom, but that is in a market where only 11% of the mobile base of 952m has migrated to 3G as yet. The Wi-Fi offers help to introduce consumers to the joys of mobile data without forcing them to sign a contract, and also save the operators on the hefty subsidies which they have been using to stimulate 3G uptake.

Subsidies were rare in China in the 2G era but have been increased dramatically for 3G, hitting margins, especially at Mobile. In its third quarter, its profits rose by 3.7% year-on-year to CNY30.7bn, but that was short of analyst forecasts, largely because of the cost of subsidizing smartphones. However, the returns on Wi-Fi are tiny compared to those on 3G, so over-reliance on this strategy could hit earnings on another front. China Mobile says its Wi-Fi iPhone users consume twice as much data per month as its other smartphone subscribers, and three times the company's average.

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