Dennis:
China Unicom will achieve its objective of subscribing seven million CDMA users this year, [Wang] stressed, saying China Unicom is not going to massively expand the GSM service.....According to Wang, a lack of CDMA handsets in the Chinese market will be resolved in the first half of this year
Hmmm. How does this positive statement from Unicom's Wang support the comment from the Piper Jaffray guy just a few days ago?:
A leading Chinese cellular network operator is adding customers to its new network far more slowly than expected and may miss its year-end targets by a wide margin, according to an analyst's note released on Monday
U.S. Bancorp Piper Jaffray analyst Sam May issued a note based on a recent trip to China in which he said China Unicom Group and its subsidiary China Unicom Ltd. were likely to add only 3 million subscribers to their Code Division Multiple Access (CDMA) network this year.
That is below Unicom Group's forecast of 7 million to 8 million subscribers, May said, and is negative for Qualcomm Inc. (NasdaqNM:QCOM - news), a wireless technology firm that developed the CDMA standard and licenses it worldwide.
May said his note was based on meetings with Unicom, handset manufacturers, and equipment distributors.
Message 17149066
I wonder who at Unicom May talked to?
It's worth noting that Unicom's lease agreement for the CDMA network locks them into paying a lease fee for 2 million subs in Q1 2002, for 4 million subs in Q2, and anticipates 6 million in Q3 and 7-8 million in Q4. For Q3/Q4, they have to provide 3 months notice of the actual capacity they intend to lease - i.e. notice by 3/31 of the capacity needed in Q3, and by 6/30 of the capacity needed for Q4. The lease fee is RMB 299/sub (annual basis), or about $8.80/sub/Q, so there's certainly a financial incentive for Unicom to meet its sub targets at least for Q1/Q2, since they are already locked into paying for the 2/4 million capacity to the tune of over $50 million through Q2. The notice requirements mean that we will find out pretty soon how Unicom thinks 2H 2002 will go.
Wang's statement (in the article you posted) that:
China Unicom is not going to massively expand the GSM service
is also the first public statement by Unicom that I've seen on these lines. I previously commented that Unicom, with only 2x6 MHz in the 900 MHz frequency band and 2x10 MHz in the 1800 MHz frequency band for GSM, but with 2x10 MHz in the 800 MHz frequency band for CDMA, would be hard pushed to accommodate many more subs on their GSM networks without additional spectrum (32 million sub capacity in current spectrum per their "white paper" last year), and that they would be more likely to accommodate new subs via the expansion of the CDMA network (80 million sub capacity in curent spectrum).
Wireless subs in China are projected to grow from 145 million (end 2001) to around 290 million (end 2005). That's an average of over 36 million/year sub adds, a number which may prove conservative given the almost 60 million sub adds last year and the projected 55 million sub adds this year (with 5.1 million already on board in January).
Of the new subscribers in 2001, 37.29 million (62.6% share) signed with China Mobile Communications, while the remaining 22.25 million (37.4% share) signed with China Unicom Group. That would seem to indicate Unicom stands to gain market share on Mobile in the next few years from its current 28% level.
This all leaves me wondering how China Mobile, even with possibly slowly declining market share, will be able to accommodate almost a doubling of their user base over the next 3 years, in their current allocated spectrum for GSM, particularly if they push ahead with the spectrum hogging GPRS deployment.
This all seems to point to CDMA 1x for virtually all new subs for Unicom, plus GSM 1x added to the GSM network instead of GPRS. If this is where Unicom is headed over the next couple of years, China Mobile may have no choice but to deploy GSM 1x to maintain growth in current spectrum ahead of WCDMA deployment, which would appear to be at least a couple of years away in China.
David T. |
