Qualcomm, Eastcom Sign Research Pact, Eastcom Says (Update1)
6/7/00 4:35:00 AM
Source: Bloomberg News
Beijing, June 7 (Bloomberg) -- Qualcomm Inc. struck a pact with a Chinese mobile phone company to develop equipment using the U.S. company's technology, helping offset a costly delay in reaching agreement with China United Telecommunications Corp.
Qualcomm signed an agreement today with Eastcom, China's largest state-owned mobile phone maker, the Chinese company said. Qualcomm will provide software, chipsets and technical support to Eastcom, it said.
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Qualcomm shares have slid recently on reports that China Unicom, China's No. 2 phone company, will delay implementing a wireless phone network based on the San Diego, California-based company's code division multiple access, or CDMA, technology.
Today's agreement, financial terms of which weren't disclosed, could help arrest that slide. After rising 27-fold last year, Qualcomm's shares have plunged 62 percent this year. The stock rose 1 5/8 yesterday to 68 7/8.
''We want to be a leader in the third generation of the CDMA sector, which until now hasn't been fully commercialized,'' Eastcom spokesman Cai Zhuping said. ''The trend in China is to adopt a broadband CDMA, rather than a narrowband one, as was agreed between China Unicom and Qualcomm earlier.''
China Unicom had originally planned to begin the Qualcomm service this summer. When Unicom agreed to license the technology, Qualcomm spokeswoman Christine Trimble said Unicom expected to have the capacity to provide service to 10 million subscribers this year.
Reports quickly surfaced the Chinese government was delaying the project, however. On Sunday, China's state media cited an unidentified Unicom official as saying it won't use Qualcomm's technology for at least two years.
Qualcomm wants its technology used for China's mobile phone market, which is expected to rise to 70 million users this year from 43 million last year. Qualcomm makes CDMA chips for phones and network equipment and collects royalties from licensing its technology.
Its efforts to expand in China have been hampered by a rival cell phone standard developed by European companies called the global system for mobile communications technology, which had a head start.
''CDMA appears to be losing momentum in China,'' said Charle Peza, head of telecommunications research at Lehman Brothers in Hong Kong. ''Prospects appear to be geared towards'' third- generation CDMA and GSM networks, he said.
Unicom is now trying to raise $5.26 billion by selling shares overseas. If successful, the sale may be the largest first-time public offer by a Chinese company. Email this story to a friend Click for printer-friendly format
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