Unicom will not cut tariffs to lure customers
Straight from the Globalstar school of marketing. Jacobs quoted in article too. DPR
Thursday March 7, 5:20 am Eastern Time
China Unicom buying CDMA phones to boost launch
biz.yahoo.com
(UPDATE: Adds details, background, industry and analyst comments)
By Jonah Greenberg and Daisy Ku
BEIJING, March 7 (Reuters) - China Unicom Group, the smaller of China's two cellular giants, said
on Thursday it will buy 500,000 CDMA phones to soothe the nerves of handset makers and jump-start what has been a disappointing rollout of its new network.
President Wang Jianzhou also said Unicom will not cut tariffs to lure customers to
its premium-priced CDMA service, which uses technology developed by
Qualcomm Inc (NasdaqNM:QCOM - news).
``We're confident...that we can complete this year's subscriber target,'' Wang
said, referring to the parent company's goal. Hong Kong-listed China Unicom Ltd
is leasing CDMA network capacity from its parent in some provinces.
``Our capacity is for 15 million subscribers and we plan for seven million (in
2002),'' Wang told reporters on the sidelines of a CDMA technology conference
in Beijing.
A lack of handsets and high prices in a low-spending market have slowed
consumer takeup of the network that China Unicom launched in January after
years of diplomatic wrangling between Beijing and the United States.
Analysts and investors have questioned the wisdom of its decision to build a CDMA network alongside its network based on the more popular European GSM technology.
``In order to remove manufacturers' worries about the CDMA market, we decided to buy direct from the manufacturers 500,000 handsets in March,'' Wang told the Beijing conference.
He did not say which manufacturers would benefit from Unicom's shopping spree -- although he said it would be a few. Nor did he say how much the carrier planned to spend.
WAIT AND SEE
CDMA phones on sale in China include models made by Motorola (NYSE:MOT - news), Eastcom , Hisense Group Inc, Haier Group Inc and imported handsets from Korean giants LG Electronics and Samsung Electronics . Of the 19 firms China has licenced to produce headsets, Motorola is the only foreign vendor, though many local firms have joint ventures with overseas firms.
China's decision to deploy a CDMA system was seen as an opportunity to build up local hardware makers left behind in the explosive growth of its GSM network. But some local manufacturers have chosen to sit back and gauge how demand for CDMA develops.
Paul Jacobs, executive vice president at San Diego-based Qualcomm, said on Wednesday some vendors may have held back on ramping up production to see if China Unicom's launch was smooth.
``You don't want to build up a huge warehouse full of phones before you know,'' Jacobs told reporters in Beijing.
Yang Mianmian, president of white goods giant Haier Group, told Reuters this week it was waiting to see how quickly demand for CDMA handsets picked up before deciding to produce more.
TEETHING PAINS
Connie Hsu of Pyramid Research in Hong Kong noted new cellular service launches have typically been plagued by a shortage of phones.
She said the shortage should ease in six months or so, but added Unicom also should cut prices for CDMA as there is little reason for big-spending GSM customers at lone rival China Mobile (HK) and its parent to switch.
``Their business model isn't really that sound to me,'' she said.
China Unicom's Wang was recently quoted in state media as complaining that the few CDMA handsets which were available were too expensive and prone to glitches.
A research report by Merrill Lynch said handsets it found recently in Shanghai cost 2,000-4,000 yuan (US$241-$483) -- expensive relative to GSM phones.
Despite its CDMA travails, shares in Unicom surged 4.49 percent on Thursday to HK$8.15 amid a rally in telecoms stocks, outperforming a gain of 1.68 percent on the benchmark Hang Seng Index. As of Wednesday's close the stock was up four percent in the last month but off 15.2 percent in the last three months.
(US$=8.28 yuan)
(With additional reporting by Tony Munroe in Hong Kong and Alison Leung in Beijing) |
