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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: Dealer who wrote (2698)	9/21/2000 7:53:14 AM
From: Dealer	Read Replies (2) \| Respond to of 65232

QCOM--American telcos see Chinese fortunes September 21, 2000 12:00 AM PT by Rex Crum Twenty-one years after establishing diplomatic ties with China, the United States on Tuesday tore down the remaining barriers to normal trading relations with the Chinese. And no American industry was more interested in the Permanent Normal Trade Relations (PNTR) proceedings than telecommunications. However, even with visions of billions of dollars in sales before their eyes, many telecom companies realize that the best course of action toward China is to maintain a steady course and not launch a rash of knee-jerk investments in the country. "It (PNTR) sets a positive tone of cooperation," says Diana Baldwin, a spokeswoman for San Diego-based Qualcomm (QCOM). "We're going to keep up with our research and development agreements with Chinese manufacturers and roll out new services soon." The issues surrounding PNTR, while relating directly to the United States and China, were wrapped up within China's admission to the World Trade Organization this fall. And U.S. telcos have a direct stake in China joining the WTO: As a condition of WTO membership, the country is required to allow foreign telecom firms to own as much as 49 percent of a Chinese telecom company, and increase that to 50 percent after two years. Long-term outlook The prospect of owning a large piece of a Chinese telecom, as well as lucrative contracts to build telecom infrastructure, has several American companies thinking about the long-term implications of involvement in China. "This is a country with about 150 million lines in service and the potential is huge," says Barbara Burgess, an international media relations director for Lucent Technologies (LU). Burgess said Lucent has eight joint ventures with Chinese companies working on optical, wireless and other telecom infrastructures in China. But in spite of international guidelines to allow foreign investment, and a significant number of American companies already having established business in China, many industry watchers are still concerned over advantages the Chinese government may give to China Unicom (CHU), the country's second-largest telecom company behind China Telecom. Dragging its feet Nearly all Chinese telecoms are tied to the country's government. For example China United Telecommunications--which owns 75 percent of China Unicom--is run by the state. China Unicomn, in turn has attracted many deals due to its substantial wireless holdings and because it is publicly traded in the U.S. Analysts say China Unicoms tight relationship with the government has allowed the company to offer better deals on service and the government may drag its feet on allowing competition with the company. "You can expect any dealings with (China) Unicom to be political," says Brownlee Thomas, an analyst with Giga Information Group. "Nothing will move too fast, either, because getting into China's telecom markets is like dealing with a series of fiefdoms." Probably no American telecom company has felt as many swings in the Chinese market, or known the ups and downs of dealing with China Unicom than Qualcomm. All year long, the company has been told one thing and then another regarding whether China Unicom will deploy wireless networks based on Qualcomm's CDMA wireless technology. On again, off again China Unicom sealed a deal in February to roll out CDMA, then backed off just before the company went public in June. At that time, China Unicom said it would focus on building its own GSM-based network. GSM, a wireless standard used primarily in Europe, competes against CDMA and is used primarily by Nokia (NOK) and Ericsson (ERICY). Then, earlier this month, China's Ministry of Information Industry mandated China Unicom to commit to using a CDMA-based network. China Unicom currently has about 7 million wireless subscribers. Qualcomm's Baldwin called the deal with China Unicom a "key research and development agreement" that would help build the long-term future of CDMA. Baldwin says Qualcomm has also signed up 12 Chinese manufacturers to build CDMA handsets and infrastructure equipment. Baldwin said Qualcomm was "very happy" that PNTR had passed because it would help prevent telecom issues like the CDMA confusion from arising.