<font color=green>Will China be the Biggest CDMA Market? Message 14372297
Here they come again! Everyone is obviously taking a very jaundiced view of the on-off-on-off-on-off-on-off-on digital signal process that China has taken to Unicom selling CDMA. Pickings were small [relatively] this time for any 'insiders' trading on the latest 'on' move. So the 'off' move which many expect when the USA Senate has finished voting won't come as a surprise and won't move the stock price down much [or at all].
Much, much more importantly, notice this: <...The minister derided auctions in the UK, Germany and Korea for third-generation telecoms licences, reinforcing the belief among analysts that China is unlikely to hold an open auction.
"I don't want to see a bubble emerging from the advent of the 3G," Mr Wu said. "There is no set standard or business at the moment. How many years will it take those companies [that won 3G auctions] to recover their initial investment of, say, dozens of billions of US dollars or $40bn in the case of [the German auction]?">
That is very good news for QUALCOMM. It means a beauty contest which probably means, "Cover the country in CDMA and you can have a licence - don't forget to pay us a lot of dosh too...the party needs the support and your 'beauty' points will be enhanced by providing 10 million handsets free to government officials and PLA members."
Instead of $200 billion going on spectrum in China, that money will go to vast buildout of infrastructure at an early date. That is extremely good news for QUALCOMM. It will make China far, far and away the biggest CDMA market and quickly. The CDMA supplier [Unicom] will be able to give 300 million people a good [or total] handset subsidy as well as covering the country in CDMA so adoption and spread of CDMA will be very fast.
By China holding a beauty contest, QUALCOMM will get another $10 billion in royalties and ASIC sales which would not happen with an auction which would not involve buildout of infrastructure to uneconomic areas. With beauty contests, uneconomic areas suddenly become 'economic' and rate of buildout suddenly becomes 'economic' too.
Mqurice
PS: If British and German 3G spectrum is worth $600 per capita, then Chinese [much more crowded but with much lower GNP per capita] would be worth maybe $200 per capita [China has a very high growth rate and is not likely to stay poor for long]. With 1.2 billion people, that makes the spectrum worth about $240 billion.
In the British and German way, that $200 billion would go to the government for social welfare waste [high unemployment and general government waste]. In the Chinese way, that $200 billion will be divided up something like this.
$30 billion to Jiang Zemin and his buddies to stay in charge.
$100 billion to rapid buildout where it would not otherwise be done so soon.
$70 billion to the companies who get the spectrum by way of free gift of spectrum [they get the money by charging the going rate for spectrum which is a function of shortage, not infrastructure or 'cost' of providing the service].
$40 billion for incidentals and miscellaneous [that's quite a lot of incidentals].
Q! would get about $3 billion of that $100 billion in royalties [lower for infrastructure and higher for handsets]. Q! would also get ASIC sales of another $10 billion [for the infrastructure and handsets which would not otherwise have been bought].
So, Q! will be about $10 billion better off from a beauty contest than an auction. But what a shame Q! doesn't get to charge the right royalty rate and collect their fair share of that $200 billion worth of spectrum [about $100 billion of it].
Q! benefits from a Chinese beauty contest by about $1 billion profit per year for the next ten years! That's pretty good and good reason to hope the beauty contest model is found ravishing by the government officials.
Some would say that $240 billion is conservative and that because spectrum will be much more cluttered with jeek by jowl users fighting for a photon and getting busy signals, and because Chinese love yakking and invented reading and are likely to be more avid WWeb users than Brits or Germans [who were Neanderthals while Chinese were already inventing complex language and government], the spectrum should be worth much MORE per capita than in Europe. China's GNP growth rate per capita is spectacular and is NOT going to slow any time soon so they poverty angle is tenuous too. So maybe China's spectrum is worth double the European per capita, which would be $1,200 x 1.2 billion people = $1,440 billion.
That is serious money in anybody's language. That's almost as much as QUALCOMM is worth. Q! is worth that now but markets are slow so people are still undervaluing Q! because they have totally failed to understand just what WWeb is going to mean to the world and have not figured out how much money Q! will be paid.
Since China has got little legacy telephone service [despite Mao's Great Leap Forwards and Deng's Black and White Shrodinger Cats catching mice in the inscrutable Chinese box], 3G will become the phone service so it will be adopted at a great rate by people who either have no phone service or 3G phone service, with WWeb add-on.
We always hear how countries are decades or centuries behind but few people seem to understand that when a child is born, they do not care about 100 years ago or even last year. The world starts with their eyes opening and they see CDMA! They do not go backwards. They go immediately into the new age. If they are free to do so. |
