Qualcomm, China's Eastcom Sign an Agreement for Cellular-Phone Equipment
By Michael Lovell
San Diego, June 7 (Bloomberg) -- Eastcom, China's biggest mobile phone maker, signed an agreement with wireless service provider Qualcomm Inc. for chipsets, software and technical support, Eastcom said.
Financial terms weren't disclosed, though the agreement is likely to be worth several million dollars to Qualcomm, according to PaineWebber analyst Walter Piecyk. Eastcom will develop mobile handsets and wireless phone equipment based on Qualcomm's standards and technology.
Qualcomm shares, which rose 27-fold last year, had fallen 61 percent this year before today, most recently on news that China's No. 2 phone company, China United Telecommunications Corp. will delay implementing a wireless phone network based on Qualcomm's code division multiple access technology. The shares rose 4 9/16 to 73 7/16 in midday trading.
``This is not some strategic licensing agreement that's going to change what's going on in China,'' said Piecyk, who has a ``buy'' rating on Qualcomm shares. ``Getting a licensing agreement with a cell-phone manufacturer was expected, based on Qualcomm's agreement with China Unicom in February.''
Qualcomm's CDMA technology, currently used by about 57 million people, is expected to become more widely used as the so-called third generation cell phone service, which will allow Internet access on wireless phones among other services, begins to be deployed. Voice and data traffic can travel faster using CDMA than on competing technologies, Piecyk said.
Two Year Delay
Qualcomm has said it's confident China Unicom will adopt its technology, though reports in the Chinese press said it won't be for at least two years. Originally China Unicom had planned to implement the wireless network this summer and Qualcomm spokeswoman Christine Trimble had said the phone company expected to have capacity to provide service to 10 million subscribers this year.
The China mobile phone market 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.
China 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. |
