China Mobile Wants Cut of Apple’s App Store Revenues

China Mobile’s talks with Apple to officially add the iPhone to its smartphone lineup continue to drag on with no end in sight. The latest intelligence on their discussions has the two companies “firmly engaged” on the idea of future deal, but not exactly sprinting to ink it.

The reasons for that are twofold. Foremost, the iPhone is already killing it in China without China Mobile. And as much as Apple would like to put the iPhone on the world’s largest wireless carrier, it’s not going to do so unless it gets the terms it wants. And right now there’s some disagreement between the two companies over App Store revenue.

Industry sources tell Sterne Agee analyst Shaw Wu that China Mobile is looking for a cut of App Store revenue. Historically, Apple has never done this, and almost certainly doesn’t want to begin doing so now. And with 10 million unlocked iPhones already on China Mobile’s network, and the carrier encouraging them with gift cards for free Wi-Fi service (the iPhone isn’t compatible with the carrier’s TD-SCDMA 3G network), there’s little reason to rush into a deal, particularly one that will require it to produce a TD-SCDMA-compatible iPhone.

So Apple is sitting back and focusing its efforts on the 4G TD-LTE iPhone that will presumably succeed the 4S, and working to ensure that it will be compatible with China Mobile’s network. Presumably, by the time that device is headed to market, the two companies will have finally signed a deal. And in the end, that’s the best move for Apple. China Mobile has more than 628 million subscribers in China, and could potentially double Apple’s market share in the country.