<And Qualcomm Chairman and Chief Executive Irwin Jacobs will arrive early next month
for meetings with senior officials. >
Tuesday September 5, 10:15 pm Eastern Time
RPT-China Unicom raises new hopes for CDMA in
China
By Matt Pottinger
BEIJING, Sept 5 (Reuters) - Three months after calling off plans to use current-generation
wireless technology backed by San Diego-based Qualcomm Inc, China's number two
mobile phone company is raising expectations of a change of heart.
Chinese and foreign telecoms manufacturers, who would stand to earn billions of dollars
selling CDMA equipment and handsets, said on Tuesday China Unicom had signalled it may
build narrowband CDMA networks as early as January.
``They've been cautiously optimistic with us,'' said Scott Erickson, Hong Kong-based vice president of wireless marketing for
Lucent Technologies (NYSE:LU - news).
Bureaucratic wrangling with government regulators which sabotaged Unicom's initial CDMA plans were nearly sorted out and
Unicom ``would be given the green light to go forward'', said Erickson.
Senior executives at Qualcomm (NasdaqNM:QCOM - news), Ericsson of Sweden, Hyundai Electronics of South Korea, and
China's Qiao Xing Universal Telephone (NasdaqNM:XING - news), Datang Telecom and Eastern Communications said they
had received similar signals following a meeting last month between Chinese telecoms manufacturers and Unicom executives.
Unicom chairman Yang Xianzu repeated on Tuesday the company was studying the adoption of CDMA.
But he would not be drawn on whether the company intended to roll out current narrowband CDMA networks, or wait a year
or two for a more advanced generation of the technology.
``We are currently planning and preparing for CDMA,'' Yang told Reuters.
``We have taken a positive position towards CDMA all along.''
CDMA -- NOW OR LATER?
If Unicom waits to build future generations of CDMA, equipment makers and Qualcomm -- which earns royalties from its
CDMA patents -- would miss the lucrative opportunity of an immediate roll out of narrowband networks.
Unicom, in the run-up to the June listing of its Hong Kong subsidiary, China Unicom Ltd (NYSE:CHU - news), said it would
not adopt current generation CDMA. That news battered Qualcomm stock.
Industry analysts said at the time Unicom's decision made sense since it had already spent heavily on building networks using a
rival European wireless standard called GSM (Global System for Mobile Communications).
``The decision not to deploy narrowband CDMA was widely seen as a rational and commercially sensible position,'' said
David Gibbons, telecoms analyst at HSBC in Hong Kong.
China, the world's second biggest mobile phone market, has only about 200,000 subscribers on CDMA (Code Division
Multiple Access) networks, against 60 million users on GSM networks.
NEW POLITICAL PRESSURES
But technological advantages of CDMA over GSM, and new political pressures raised by Chinese industry and government
leaders, have apparently caused Unicom to think again.
CDMA is more effecient than GSM, allowing for more phone calls and data to be crammed into precious spectrum. That is
why all mobile networks -- including GSM -- eventually will be upgraded to incorporate CDMA technology.
Unicom already has the exclusive right to the spectrum on which CDMA phone calls ride, and is scheduled to take over small
military-backed CDMA networks -- although that has yet to happen.
Equipment manufacturers argue it will be cheaper for Unicom to upgrade from narrowband CDMA into future technologies
than from GSM networks.
Chinese equipment makers have good reason to hope Unicom will see things their way.
At least a dozen firms, many state-owned, have spent upwards of $200 million to build CDMA factories and conduct research.
With their plants gathering dust, the companies have banded together to lobby the government and Unicom.
In a meeting last month with Unicom president Wang Jianzhou, Chinese industry executives made their pitch for a swift rollout.
While he made no promises, Wang ``responded positively'', according to an executive present at the session.
Chinese manufacturers hope Unicom will want to aquaint itself with operating CDMA technology in its narrowband form before
jumping directly to more sophisticated future technology.
Unicom Chairman Yang is likely to see such networks up close next week. Industry executives said he will lead a delegation to
South Korea -- a key market for CDMA and the first one scheduled to deploy next-generation CDMA 1X service.
And Qualcomm Chairman and Chief Executive Irwin Jacobs will arrive early next month for meetings with senior officials.
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