To: Cooters who wrote (6267)
From: Ruffian Saturday, Feb 5, 2000 11:04 AM ET
Reply # of 6270
Qualcomm bids to crack Chinese wireless arena
SATURDAY, FEBRUARY 05, 2000 12:56 AM
- CMP Media
Feb. 04, 2000 (Electronic Engineering Times - CMP via COMTEX) --
WASHINGTON - Qualcomm Inc.'s deal with China Unicom to license its
code-division multiple access (CDMA) technology could help open the vast
Chinese wireless telecommunications market to a modicum of competition with
China's largest state-owned carrier, China Telecom. But industry observers said
the deal does little to break China Telecom's stranglehold on the Chinese wireless
market.
Qualcomm (San Diego) said last week it signed a framework agreement with
China Unicom on licensing Qualcomm's CDMA technology for the manufacture
and sale of CDMA wireless equipment by Chinese companies. The deal calls for
Qualcomm to grant royalty-bearing licenses to Chinese manufacturers of CDMA
equipment. Along with paying royalties, Chinese manufacturers must also
purchase CDMA chip sets from Qualcomm as long as they are "competitive in
price and function," Qualcomm said.
Installation rolls China Unicom, China's second-largest state-owned
telecommunications company, said installation of CDMA equipment in its wireless
network was expected to begin immediately.
China Unicom, also known as China United Telecommunications Corp., was
designated by the Chinese government to negotiate the framework agreement on
CDMA licensing guidelines.
Qualcomm chairman Irwin Jacobs said the deal will help spread CDMA technology
throughout China and help China Unicom deploy a nationwide CDMA network.
Still, China Telecom and its GSM network controls an estimated 95 percent of the
Chinese wireless market.
Nevertheless, China Unicom officials said the agreement with Qualcomm will help
streamline the CDMA licensing process. "This agreement enables China Unicom
to move forward aggressively with plans to deploy a commercial CDMA network
with an initial capacity of 10 million subscribers this year, and exponentially grow
the network in the next few years," said Yang Xianzu, chairman and general
manager of China Unicom.
The deal could also reportedly help China's military, which according to western
experts owns the bandwidth used for CDMA. The Chinese military also reportedly
operates CDMA networks in at least four Chinese cities.
Industry analysts were unsure whether the deal would create real competition in
China's bustling wireless phone market. Moreover, some said the cost of building
a nationwide CDMA network to compete with China Telecom could reach $40
billion.
Profit question Even if a final agreement is completed by Qualcomm and China
Unicom, "it still remains to be seen whether Unicom will be allowed to live up to
the agreement," said Herschel Shostek, a telecommunications analyst in
Wheaton, Md. "There is very little chance that Qualcomm will gain from this
agreement."
Qualcomm's agreement with China Unicom is part of a broad strategy to promote
CDMA technology in China. In December, it launched an effort to help Chinese
manufacturers design and produce CDMA handsets and basestations (see Jan. 3,
page 30). The move coincided with deep price cuts by Chinese CDMA network
operators striving to compete with China Telecom's dominant GSM networks.
But the CDMA strategy will fail if elements of the Chinese government continue to
resist opening the wireless market to competition, analysts said. China's Ministry
of Information Industry "wants to maintain hegemony over telecommunications
[and] keep Unicom castrated," Shostek said.
In response, he said China Unicom is using the agreement with Qualcomm and
China's entry into the World Trade Organization as leverage to gain market share
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