DJ Qualcomm CEO:Deal With China Unicom Will Strengthen US Co
Dow Jones News Service ~ February 15, 2000 ~ 5:08 am EST
By Matt Forney
BEIJING (Dow Jones)--A deal between Qualcomm Inc. (QCOM) and a Chinese mobile telephone operator - set for signing Wednesday - will help convince other countries to deploy Qualcomm's technology, said Irwin Jacobs, chairman and chief executive of Qualcomm.
The deal with China United Telecommunications Corp., known as China Unicom, opens China's market to the commercial development of a wireless communications standard developed by Qualcomm called CDMA. Qualcomm can now begin talks with foreign and Chinese companies to produce the ground stations, handsets and other equipment used in the new network, which China Unicom expects will grow to more than ten million subscribers this year.
Qualcomm will receive royalty payments for products using its technology.
"The China deal is extremely important for the whole world," said Jacobs in an interview with Dow Jones Newswires, "because other countries will watch what happens here." Already, more than 40 million Chinese subscribe to mobile phone services, and that figure is expected roughly to double this year. Other countries, such as India, use a different standard, called GSM. "It will watch China closely," predicts Jacobs, as will other large markets like Thailand and Indonesia.
The technology that China Unicom will deploy is considered second generation. Third generation, which is a few years off, will allow handsets to receive huge amounts of data, such as live video, quickly from the Internet. Jacobs said the deal with China Unicom virtually guarantees that the company will continue using Qualcomm's technologies as it moves into third generation: "I think there's no question that Unicom will follow this sequence."
With the agreement in hand, Qualcomm plans to expand greatly its presence in China, increasing the number of executives in China from four to fifteen this year, and more after that. It also plans to begin an education program to teach Chinese engineers how its technology works, and to begin conducting research and development in China.
Jacobs said his company will begin talks with potential equipment suppliers " over the next several weeks."
China agreed to open its market to CDMA technology, which stands for code division multiple access, early last year during trade negotiations with the U.S. After that, however, Qualcomm remained unable to cut a deal with the Chinese ministry in charge of information technology. The ministry eventually tasked China Unicom with cutting a deal.
The delay has cost China Unicom a big share of China's mobile phone market, which is 90% controlled by China Telecom, a former state monopoly that runs a system based on the competing standard, GSM. China Telecom plans to expand the number of its mobile subscribers by 20 million this year.
People familiar with the negotiations say China Unicom had insisted that Qualcomm reduce its usual stiff licensing fees because China's market is so vast, but Qualcomm resisted for fear that other countries that have already deployed its technology would want to renegotiate their terms. Jacobs declined to reveal the terms of his company's contract with China Unicom.
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