Dow Jones Newswires -- May 17, 2001
Dow Jones Newswires
Chinese Cos Win CDMA Bids With Foreign Partners' Aid
By ANDREW BATSON
Of DOW JONES NEWSWIRES
BEIJING -- Domestic telecom equipment companies got about 40% of the CDMA equipment
contracts China United Telecommunications Corp. awarded earlier this week, though all but one of
them did so with help from foreign companies.
That outcome highlights how foreign manufacturers continue to dominate China's market for telecom
equipment, despite the joint ventures and technology transfer required as the price of entry.
Lucent Technologies Inc. (LU), Nortel Networks Corp. (NT), Motorola Inc. (MOT) and Telefon AB
LM Ericsson (ERICY) received the four largest contracts from Unicom. All of them will manufacture
the equipment at their local joint ventures.
But those foreign players also supported the bids of several other domestic companies eager for a
piece of the world's largest wireless equipment market.
Locals Pair Up With Foreigners For Contracts
Among domestic companies, the largest contract by network capacity went to Guangzhou Jinpeng
Group Co. A spokesman said the company will supply equipment for 1.405 million subscriber lines in a
contract valued at around 1.2 billion yuan ($1=CNY8.28).
That success comes only through Jinpeng's partnership with Motorola, which included the contract in
its announcement of a total of $407 million in CDMA contracts.
Motorola's figure also includes a contract for longtime local partner Eastern Communications Co.
(Q.ECM). Eastcom and Motorola declined to comment, but officials at two other vendors confirmed
Eastcom's contract was for 680,000 subscriber lines.
If its price per line is the same as Jinpeng's, the contract would be worth about $70 million. It is
unclear how Motorola and its partners will share the revenue from those contracts.
Beijing-based Datang Telecom Technology Co. (Q.DTT) has a similar arrangement with Lucent, its
partner in CDMA technology for over a year.
A Datang spokesman told Dow Jones Newswires its contract is valued at CNY760 million yuan for
810,000 subscriber lines.
Lucent said it will share Datang's revenue for that contract, and so had included the bid in its
announced contract win of 4.1 million subscriber lines, valued at over $400 million.
Even Huawei Technologies Co. (Q.HWI), China's largest maker of networking equipment, brought in
a foreign partner for its CDMA bid. Ericsson said Huawei's bid will be supplied jointly by the two
companies, though there isn't a formal joint venture.
Officials at two other local vendors put Huawei's contract at 700,000 subscriber lines, for a probable
value of around $70 million. Both Huawei and Ericsson declined to comment on the contract size.
In the end, the only local company to win a bid independently was Shenzhen Zhongxing Telecom Co.
(Q.SZZ). That's unsurprising, as analysts have long said it is the strongest local manufacturer of
CDMA products. Zhongxing signed a contract for 1.14 million subscriber lines worth over CNY1
billion, a spokesman said.
The largest contract for a domestic company went to Shanghai Bell, a joint venture in which the
Ministry of Information Industry holds a majority stake and Alcatel SA (F.ALC) owns a 33% interest.
Shanghai Bell said Thursday its contract is worth $157 million.
But that contract is seen more as a way for Korea's Samsung Electronics Co. (Q.SSE) to enter the
China market. The two companies cooperated on the bid and plan to form a joint venture to
manufacture the equipment, which Samsung said was for 1.13 million subscriber lines.
Giving a hand up to local companies is evidently a reasonable enough price for foreign manufacturers
to pay for the hundreds of millions of dollars in contracts they won on their own account.
"A lot of the local tech companies see CDMA as a new way to enter the wireless market," Scott
Erickson, senior vice-president at Lucent, told Dow Jones Newswires. "China wants to develop its
own local suppliers, and have those companies be able to globalize themselves."
-By Andrew Batson, Dow Jones Newswires; 8610 6588-5848; andrew.batson@dowjones.com |
