March 26, 1999 05:08
INTERVIEW-Ericsson in great leap forward in China
By Matt Pottinger
BEIJING, March 26 (Reuters) - Just days after fretting about its fortunes in China, a
surprise deal with Qualcomm has given Ericsson pole position in the world's fastest
growing mobile phone market, Ericsson's China chief said on Friday.
"We see it as a major step forward out here," said Michael Ricks, the Swedish
telecommunications company's China president.
Ericsson was worried after China signalled it would allow Chinese telecommunications
firms to build networks based on American CDMA technology.
That is the rival to the GSM networks sold by Ericsson and other European firms, such as
Finland's Nokia .
"It's not good news, of course, if it happens," an Ericsson executive told Reuters earlier
this week after word spread that China Unicom hoped to roll out a 40 million-subscriber
CDMA network over five years.
But Ricks said the situation flip-flopped with Ericsson's announcement on Thursday that it
was buying the wireless network business of San Diego-based Qualcomm Inc -- the
company that developed the CDMA standard.
"We'll be able to sell into both" the CDMA (Code Division Multiple Access) and GSM
(Global System for Mobile Communications) markets in China, he said.
That would allow Ericsson to compete with CDMA equipment vendors such as
U.S.-based Lucent Technologies and Motorola , Canada's Nortel and South Korea's
Samsung, which are now vying for a piece of China's multi-billion dollar mobile phone
market.
The Qualcomm unit bought by Ericsson has already begun preliminary negotiations with
China Unicom about selling CDMA equipment, a source familiar with the deal told
Reuters.
Ricks said the company would be ready to compete if Beijing gave the green light to
CDMA.
"In conversations that we've had with officials out here, I think they're also quite pleased
with this move," he said.
In 1998, China overtook the United States as Ericsson's largest market, with more than
$2.8 billion in sales.
Thursday's deal also settled a nasty legal battle between Ericsson and Qualcomm over
patent rights that would have complicated the transition to the next generation of mobile
phone technology.
The two companies will now share royalties on CDMA handsets and equipment, and
back a unified international standard for so-called third generation technology, such as
video phones and hand-held wireless Internet browsers.
Until now, it was expected that competition between CDMA and GSM would continue as
the systems upgraded into slightly different third-generation technology.
Ricks said the settlement of the patent issue would give consumers hand-held devices
that operate on either standard.
"They'll be able to have one phone in the future that roams between those different
networks," he said. "It's great news for the whole industry. We're pretty happy about that."
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