The mist is clearing -- the GSM-ites may be behind the China delay.
CDMA mobile technology suspended in China
By Matt Pottinger
BEIJING, Feb 25 (Reuters) - A Chinese official confirmed on Friday that Beijing has suspended the rollout of CDMA mobile phone networks, casting a shadow over the future of the U.S. technology in one of the world's most important markets.
The official in the Ministry of Information Industry's Comprehensive Planning Department offered only vague reasons for the suspension and declined to say when a rollout could resume.
"It has just been suspended," the official told Reuters.
"China Unicom has not completed its preparations and applications," the official said, referring to the state-owned carrier which has been planning to build a national CDMA network.
San Diego-based Qualcomm Inc <QCOM.O>, which owns CDMA patents, is positioned to earn hefty royalty payments if the technology is deployed, and foreign equipment suppliers are jockeying for meaty sales contracts.
But the suspension has forced China Unicom to delay talks on bids by foreign and Chinese firms.
Century Mobile Communications, a military-backed phone company which already operates CDMA networks in several Chinese cities, has also postponed talks with foreign suppliers, said Michael Ricks, president of Ericsson (China) Co.
POLITICAL FOOTBALL
Several executives said they were worried the suspension was a tactical move by Beijing aimed at pressuring the U.S. Congress to support China's entry into the World Trade Organisation.
Others said the government wanted to vet a key pact signed last week between Qualcomm and China Unicom which licenses CDMA technology to Chinese manufacturers.
"Politics and face are always part of the problem," said a top Chinese executive at a firm competing for CDMA contracts. "But I think the government just wants to read the Qualcomm agreement and then make sure all manufacturers have licences."
China Unicom executives declined comment.
Whether geopolitics or bureaucratic infighting is to blame for the delay, many executives agreed: the longer the delay lasts, the less likely Unicom is to build CDMA networks at all.
Unicom, formally known as China United Telecommunications Corp, began fighting a year ago for permission to build CDMA networks to challenge state giant China Telecom, which operates European GSM (global system for mobile commmunications) networks.
At the time, CDMA was considered an attractive alternative to GSM because it constitutes the technological foundation for future "third generation" technology that will allow more sophisticated mobile services, such as hand-held Web browers.
Unicom has hoped the 11 million subscriber CDMA network it has been planning to build this year would give it a head start in the eventual jump to third generation services.
WINDOW OF OPPORTUNITY CLOSING
But over the past year, GSM makers have achieved technological breakthroughs and international pacts that make GSM networks increasingly easy and cheap to upgrade -- robbing CDMA of a key advantage, industry analysts said.
"A huge amount of work has gone in by GSM operators and equipment providers to make sure that it is upgradeable to third generation," said Alistair Scott, senior telecommunications analyst at Merrill Lynch in Hong Kong.
If the delay on CDMA drags on for months, Unicom might be compelled to scrap its plans and focus on expanding its GSM infrastructure or building third generation networks, analysts said.
"If China Unicom gets rolling pretty quickly, there are still compelling commercial reasons to build current generation CDMA networks," said Ricks.
"But if they wait another year, the situation becomes a little different," he said.
To be sure, it will be some time before Chinese customers have the appetite -- and paychecks -- for third generation services, leaving an good opportunity for CDMA.
Chinese Premier Zhu Rongji pledged last year to roll out CDMA as gesture to U.S. leaders, and the current delay could vanish as quickly as it appeared.
"In China, it's not abnormal to be notified there is a delay," Ricks said. "Sometimes they can be quite minor."
08:06 02-25-00
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