To all: Story re: China
biz.yahoo.com
Wednesday March 24, 5:42 am Eastern Time
European mobile firms face new challenge in
China
By Matt Pottinger
BEIJING, March 24 (Reuters) - After storming to a commanding lead
in China, European mobile phone companies like Ericsson and Nokia
could face a tough challenge if China follows through with plans to
open the door wide to U.S. cellular technology.
Nokia and Ericsson , however, do not appear unduly concerned, and
analysts said it would take time for CDMA technology to prove itself in the market.
In a sudden shift, China has signalled it will allow Chinese telecommunications firms to build CDMA
(Code Division Multiple Access) networks, industry players said. The U.S.-developed technology is now
limited to trials in four cities.
China's market for mobile network equipment and handsets, worth billions of dollars annually, has been
dominated by GSM (Global System for Mobile Communications) technology from Finland's Nokia and
Sweden's Ericsson.
Beijing now appears ready to back its small telecommunications firm, China Unicom, to build CDMA
networks to compete with the state-owned virtual monopoly China Telecom, Unicom officials and foreign
executives said.
''It's not good news, of course, if it happens,'' said Ericsson senior vice-president Jan Malm in Beijing.
Andrew Page, head of Nokia's corporate planning in China declined to comment on the impact of such a
shift.
''It's still speculation. We can't really comment about that until there's some form of government
announcement,'' he said.
Neither of the Nordic companies make CDMA network equipment although Nokia does make CDMA
handsets for the U.S. market.
The stakes in the Chinese market are huge.
In 1998, China overtook the United States as Ericsson's largest market, with more than $2.8 billion in
sales. For Nokia, China last year represented its second largest market, with 13 percent of total sales, or
$2 billion.
China has more than 23 million mobile phone subscribers, and the Ministry of Information Industry
projects nearly 40 million by the end of the year.
In a recent interview, before China's apparent policy shift, Page said: ''We have global growth targets of
25 to 35 percent and we have similiar targets for China as well,'' in 1999.
Companies that would benefit from the expansion of CDMA include U.S. equipment suppliers Motorola
(NYSE:MOT - news), Lucent Technologies (NYSE:LU - news) as well as Qualcomm Inc (Nasdaq:QCOM
- news), which stands to earn hefty royalties on the technology.
Canada's Nortel (Toronto:NTL.TO - news) and South Korea's Samsung [SAGR.CN] are also CDMA
equipment providers and are likely to benefit.
They argue the technology makes more efficient use of scarce airwaves than GSM and has superior voice
quality.
But Ericsson and industry analysts said CDMA could have a difficult time cracking China's market, even if
it is given Beijing's official blessing.
''It looks very late to introduce a new standard,'' said Ericsson's Malm.
Even under an aggressive expansion plan, he said it could take years for CDMA networks to become as
ubiquitous as GSM, which is more attractive to consumers who want the ability to use their telephones in
other cities.
''We have a very strong case with GSM. We think we will be able to compete,'' he said.
Duncan Clark, a partner at telecom consultancy BDA Associates in China, called Unicom's plans to gain
two million CDMA subscribers this year ''crazy.''
''Where are they going to get the expertise and the people to deploy it?'' he asked, citing the time and
capital needed to order, install and perfect the networks.
''Commercially, I don't see the value in it,'' he said.
Its real worth is as a political gift from Premier Zhu Rongji to Washington, which is fuming over a $57
billion trade deficit with China last year. Zhu, who is said to back the CDMA plan, is due to travel to the
United States in April.
''It's a box with lots of wrapping paper, but you open it up and nothing's inside,'' Clark said.
Copyright © 1999 Reuters Limited. All rights reserved. |
