XING --
Sorry to disappoint you:
Qiao Xing far off making CDMA phones in China
By Matt Pottinger
BEIJING, Dec 29 (Reuters) - Qiao Xing Universal Telephone Inc. (NasdaqNM:XING - news), whose shares skyrocketed on Nasdaq on Tuesday, is still a long way from getting permission to make CDMA mobile phones in China, industry regulators said on Wednesday.
Qiao Xing's British Virgin Island-based holding company saw its stock price soar $42- to $51 in New York on Tuesday after the firm said the government of China's Guangdong province was reviewing its application to manufacture CDMA phones.
The non-state-owned company, based in the Guangdong city of Huizhou, also said it had struck a preliminary joint venture agreement with a ``major Asian telecommunications firm' that makes and markets CDMA phones.
But the Ministry of Information Industry in Beijing has the final say over which firms will be allowed to manufacture CDMA mobile phones and Qiao Xing had yet to file an application, a ministry official told Reuters.
Not only had no Chinese company yet been given permission, but applicants may have to wait until China wins final admission to the World Trade Organisation before any is awarded, the official said.
``There have been no approvals for CDMA and this will have to wait until the WTO issue is resolved,' he said.
In November China reached an agreement with the United States on its terms for WTO membership, but still has to finalise deals with the European Union and several other WTO members. It expects to win admission in the first half of next year.
Even after becoming a member of the organisation which sets global trade rules, China would not be obliged to honour its deal with the United States unless the U.S. Congress extends permanent Normal Trading Rights to China.
JOINT VENTURE HOPE
Qiao Xing said the deal with the unnamed Asian firm was not finalised, but that it hoped to set up a joint venture in which the two firms would set up a factory in China where Qiao Xing would manufacture the phones.
Company chairman Wu Ruilin conceded many steps remained before the company could begin manufacturing, but said Beijing officials had given positive signals.
``After we get provincial permission, the provincial planning commission will inform Ministry of Foreign Trade and Economic Cooperation,' Wu told Reuters.
``MOFTEC has already appraised our situation' and said it was optimistic the joint venture could win approval, he said.
After that, the company would be eligible to apply to the Ministry of Information Industry, he said.
``There will only be five companies' which would ultimately win permission to manufacture CDMA phones in China, he said.
Company officials said the firm did have a back-up plan if the Ministry of Information Industry turned down its application -- forming an alliance with another Chinese firm and re-applying.
Qiao Xing reported 1998 sales of $44.3 million, down from $48.3 million in 1997.
It said a shift to higher margin cordless and special function phones pushed net income for the period up to $5.7 million, or $0.72 per share, from $5.0 million, or $0.66 per share in 1997.
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