ST, XING looks like a great short NOW! Qiao Xing far off making CDMA phones in China...
By Matt Pottinger
BEIJING, Dec 29 (Reuters) - Qiao Xing Universal Telephone
Inc. <XING.O>, 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.
((Beijing Newsroom +8610 6586-5566 ext 202, Fax +8610
8527-5258 beijing.newsroom@reuters.com))
REUTERS
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