Doesn'tlook good for QCOM
Mondays wsj,courtesy of so.cal time zone..
June 5, 2000
China Unicom Scraps Plan
Linked to Qualcomm Deal
By MATT FORNEY
Staff Reporter of THE WALL STREET JOURNAL
BEIJING -- China's No. 2 phone company has confirmed it won't use a mobile-phone technology designed by Qualcomm Corp. of the U.S. for at least three years -- a decision that could reverberate from Silicon Valley to Washington.
China's promise to open its markets to Qualcomm's current generation of cell-phone technology was key to it earning U.S. support to join the World Trade Organization, the Geneva-based group that sets global trade rules. Last year, Premier Zhu Rongji personally assured U.S. Commerce Secretary William Daley that China would open its markets to San Diego-based Qualcomm's code-division multiple access, or CDMA, technology, according to people in the room at the time, a decision that was supposed to result in millions of Chinese subscribers using Qualcomm technology by the end of this year.
Chinese Challenge Mobile Giants
China Unicom Sends Mixed Signals About Adopting U.S.-Designed CMDA (June 2)
But after China's entry into WTO was stalled by the U.S. last year -- and the Chinese embassy in Yugoslavia was bombed -- China's enthusiasm for Qualcomm's technology likewise faded. As China's WTO bid picked up steam last autumn and was endorsed by the U.S. last November, Qualcomm's fortunes in China rose, culminating in it signing a "framework" agreement with Unicom in February. But Qualcomm then ran into problems with China over the amount of its technology that would be produced locally.
The delays meant Qualcomm was starting to make little economic sense to China -- analysts said it would be wasteful for China to pour billions into a technology that would become dated in a few years when companies start rolling out next-generation mobile-phone technology.
"The company had planned to provide CDMA services this summer," said a representative for China United Telecommunications Corp., or Unicom, who was quoted in the state-run Xinhua news agency Sunday. Unicom canceled the project because "the timing of constructing a narrow-band CDMA system has become unfavorable," he said.
"Narrow band" refers to Qualcomm's currently available CDMA technology. The spokesman said he expected Unicom to use Qualcomm's next-generation, or "wide-band," CDMA technology in around 2003. But the spokesman also said that the February agreement, in which Unicom agreed to license some form of CDMA equipment from Qualcomm, "could be canceled."
Over the past week, Unicom sent mixed messages on whether it would use Qualcomm's technology, causing a sell-off of the company's stock, which had risen more than 20-fold last year but has sunk 60% from its January high.
Unicom revealed its plans as it launched a bid to raise around $4 billion on stock markets in Hong Kong and New York this month. Senior Unicom executives on a road show that began last Monday in Hong Kong began telling potential investors that the company would not use Qualcomm's technology in its present form -- even as officials back in Beijing were saying it would, pointing to the framework agreement as proof of their intent to deploy the technology.
Write to Matt Forney at matt.forney@wsj.com
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