China Rejects Cheaper Version of Qualcomm Technology (Update1)
By Kenneth Wong
Beijing, Sept. 26 (Bloomberg) -- China has rejected a cheaper version of Qualcomm Inc.'s wireless technology, dashing hopes by Lucent Technologies Inc. and Huawei Technologies Co. of cornering a niche in the world's largest cellular market.
China won't use the 450-megahertz variant of code-division multiple access technology for so-called third-generation cell- phone service because of the frequency spectrum is limited and radio signals could interfere with calls.
``The 450 standard has been completely ruled out,'' Li Haiqing, director of the Ministry of Information Industry's frequency planning division, said in an interview. Huawei and Lucent ``can sell CDMA450 equipment anywhere outside China. In China, it's a definite no.''
Lucent, the largest U.S. maker of phone equipment, and Huawei, China's largest, lobbied the government to adopt the standard because they're the top makers of the required network equipment. Their biggest customers so far have been Russia and Romania.
Billions of dollars of contracts ride on China's decisions about which standards it will allow as it moves to more advanced wireless systems. China already has 185 million cell phone users, exceeding the combined populations of Britain and Germany, and adds about 5 million users a month.
``I don't think any one or a set of standards can be decided this year,'' Li said. ``Next year, probably.'' Li said the ministry will probably announce before year-end a set of frequencies that China will use for third-generation mobile services.
Rivalry
The rejection of the CDMA450 standard means Lucent and Huawei will face more competition as China rolls out new systems. Among their rivals for network-equipment orders in China are Motorola Inc., Nortel Networks Corp. and domestic maker ZTE Corp.
Murray Hill, New Jersey-based Lucent, which has about half of the world's CDMA equipment market, has seen sales fall as phone companies worldwide pare spending. Its sales will drop 37 percent this year to $12.2 billion, Merrill Lynch & Co. forecast.
China's wireless duopoly of China Mobile Communications Corp. and smaller rival China United Telecommunications Corp. spent about $19 billion on equipment last year. The government plans to let the country's two biggest fixed-line phone companies sell cellular service to increase competition.
China United, the nation's lone operator of a CDMA network, uses the 800-megahertz bandwidth. CDMA450 networks cost less to build than do networks using the higher frequency because at the lower end of the spectrum signals travel further, allowing fewer base stations to cover the same area, Lucent Director of Mobility Chris Coughlan said.
CDMA450 been touted as one of the cheapest technologies with which to deliver high-speed wireless services to far-flung, sparsely populated areas.
Shenzhen-based Huawei has spent almost two years developing the 450-megahertz variant of the CDMA technology produced by San Diego, California-based Qualcomm. ``We're determined to keep developing CDMA450,'' said Yu Chengdong, Huawei's director of 3G products. ``We just have to lobby the government harder.''
Standards
Huawei, with customers in about 20 countries, expects its overseas sales to more than double to $670 million this year.
Excluding CDMA450, China has three possible high-speed standards.
China United plans to start offering services next year using Qualcomm's CDMA2000-1X standard.
China Mobile will probably use a European-developed technology known as wideband code-division multiple access (W- CDMA). This is the high-speed variant of the global system for mobile communications standard that currently dominates China's mobile market. Siemens AG and local company Datang Telecom Technology Co. are developing a third standard called TD-SCDMA at the request of China's government.
Lucent shares, down 80 percent this year, rose 3.1 percent to $1.01 in New York Stock Exchange composite trading yesterday.
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