News/QCOM--WSJ:"QCOM Convinces Unicom To Enlarge CDMA-Reliant Network"
public.wsj.com
Can anyone verify/confirm below? TIA ;-).
>>>To win the contract, Qualcomm significantly cut its normal royalty rates, accepting only 2.65% on sales of CDMA handsets made in China, and only 1% on equipment sales.
Companies in South Korea, by contrast, were forced to accept up to 8% royalties.<<<
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>>>Oct 20,2000
Qualcomm Convinces China's Unicom To Enlarge CDMA-Reliant Network
By Matt Forney and Jason Dean
Staff Reporters of The Wall Street Journal
BEIJING -- A last-ditch lobbying effort by a former U.S. official has put Qualcomm Corp. back into the race to build a mobile phone network in China, but the San Diego-based company's victory may be less lucrative than expected.
An official of China's No. 2 phone company, China United Telecommunications Corp., or Unicom, confirmed Thursday that it will enlarge a small existing mobile-phone network that uses technology pioneered by Qualcomm called code division multiple access, or CDMA. "We're definitely going to expand it," said Wang Jianzhou, Unicom's executive vice president.
The announcement caps a remarkable turnaround in Qualcomm's fortunes. China had agreed early last year to build a CDMA network as it tried to woo U.S. support for its efforts to join the World Trade Organization. But government support vanished as political tensions rose between the two countries and telecom bureaucrats opposed building a new, expensive mobile phone network.
By June of this year, Qualcomm's efforts to sell China current-generation CDMA technology seemed hopeless after Unicom said it would wait until next year to build an "experimental" network using next-generation CDMA technology. That would have locked Qualcomm out of China for at least a year.
So Qualcomm's chairman, Irwin Jacobs, began over the summer working behind the scenes to get a meeting with China's premier, Zhu Rongji, according to executives familiar with the company's strategy. Mr. Zhu had originally backed the CDMA network, and Mr. Jacobs hoped a face-to-face meeting would help renew the premier's support.
Qualcomm's strategists decided on a two-pronged approach. One was courting Liu Xiaoming, a senior Foreign Ministry official now assigned to China's embassy in Washington. Mr. Li, a protege of Mr. Zhu and a candidate for vice foreign minister, sent messages back to his boss that Mr. Jacobs wanted a meeting, executives and officials say.
Qualcomm also used its high-profile board member, Brent Scowcroft, who had special ties to China. Mr. Scowcroft had served as national security adviser under President George Bush and made a secret visit to Beijing in 1989, shortly after China's army had fired on unarmed demonstrators in Tiananmen Square. Mr. Scowcroft's visit, coming as China was isolated internationally, won for him Beijing's gratitude and a permanent welcome in the Chinese capital.
Mr. Scowcroft accompanied Mr. Jacobs and one other Qualcomm official to his meeting with Premier Zhu at Tsinghua University, China's top technology school, on Oct. 6. It turned out the private meeting wasn't so private. Mr. Zhu brought along Wu Jichuan, the minister in charge of telecommunications who had previously blocked the development of CDMA, and the chairman of China Unicom, Yang Xianzu. Both men cut their holidays short to attend the meeting.
Their presence enabled Mr. Zhu to remain above the proceedings, letting his underlings and Mr. Jacobs hash out details. Unicom agreed to build a current-generation network, and over the past week, Qualcomm's stock has rallied on the news.
But, Unicom has remained vague about key details. Although foreign executives hope Unicom builds a network for 10 million users -- which would mean equipment sales to China of roughly $2 billion -- Unicom has refused to say how big the network will be. It has also refused to say when the network will be built.
One hang-up is that Mr. Wu, the telecom czar, demanded that Qualcomm help develop a new type of mobile phone that can work using CDMA technology and GSM, the technology used by China's 65 million mobile phone users. Such a phone, called dual-mode, would enable a user who owns a CDMA phone to travel into areas covered by a GSM network and still use the same handset, which is impossible today. "Irwin Jacobs agreed in principle," said an aide to a participant in the meeting. Qualcomm's top representative in China, Ming Louie, declined to comment.
One thing is clear: Qualcomm's royalties are unlikely to be as big as in other countries. To win the contract, Qualcomm significantly cut its normal royalty rates, accepting only 2.65% on sales of CDMA handsets made in China, and only 1% on equipment sales. Companies in South Korea, by contrast, were forced to accept up to 8% royalties.
Write to Matt Forney at matt.forney@wsj.com and Jason Dean at jason.dean@dowjones.com <<< |
