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To: carranza2 who wrote (12922)	6/21/2001 1:58:00 PM
From: Eric L	Respond to of 34857

<< Article seems dated. The information should be known by now. >> Good source but they update articles piecmeal. Notice the article. Some info current, and some dated as you note. Information is known. No real problem. Problem appears to be acceptance rate of CDMA. EMC has a study on that, but I don't have the moola. It will be a big decision. Right now they are trialing 1x (existing spectrum) and (what else) waiting for GPRS handsets. - Eric -

To: carranza2 who wrote (12922)	6/21/2001 2:14:26 PM
From: Eric L	Respond to of 34857

re: EMC looks at Unicom >> China Unicom's CDMA Strategy - More Capacity, But Will It Bring Profits? By James Moore EMC Cellular 21-Jun-2001 The future of China Unicom's CDMA nationwide 2G network has been a rollercoaster ride of ups and downs and it was only with the announcement of all the contracts in May 2001 for the first stage of a national network, that the future of CDMA was firmly secure in China. This is some time since the Ministry of Information and Industry (MII) first granted China Unicom a licence in mid-1999. Background At the time of the original announcement of a CDMA licence there were small scale commercial Great Wall CDMA networks in operation in the provinces of Beijing, Shaanxi and Shanghai. The Chinese government at the same time announced that the People's Liberation Army (PLA), which had become involved in the commercial sector with its CESEC and Great Wall networks (Great Wall was run as a joint venture between PLA and China Telecom), would have to transfer its networks and CDMA, AMPS and TDMA (D-AMPS) equipment to China Unicom. China Unicom's licence award came before China Unicom's GSM subscriber numbers began to increase dramatically: it had just 2.6 million subscribers at the of end June 1999 compared to 24.5 million subscribers at the end of March 2001. China Unicom was not exactly thrilled when it received the CDMA licence as it had plenty of available spectrum and could not have envisaged that its subscriber base would have grown as much as it did. China Unicom at the time also had the difficult tasks of: * Negotiating royalty agreements with Qualcomm * Assuming control of existing CDMA networks from Great Wall * Solving the network's debt problems. The political process also slowed down the pace of introduction of CDMA by China Unicom. In February 2000 shortly after Qualcomm concluded a CDMA intellectual property agreement with China Unicom, the Chinese government reversed its decision to introduce CDMA technology. When China Unicom prepared to list in June 2000, CDMA was omitted from its pre-IPO prospectus but went back on the agenda towards the end of 2000. Assuming control of the Great Wall networks was a complicated process involving 133 local CDMA networks and took until January 2001 to complete. Nationwide Network and CDMA Spectrum Allocation The nationwide network is being built in several stages with the first stage of China Unicom's CDMA network covering 300 cities in 31 provinces and autonomous regions and is due to support 15.15 million subscribers. The whole network is expected to be completed by Q4 2001. China Unicom has 10MHz of spectrum (out of the total 45MHz) with China Mobile having a 10MHz allocation. When China Unicom exceeds this spectrum, it will have to apply for additional spectrum. Some of the remaining 25MHz could also be allocated to new entrants. The Contract Winners The successful bidders for the first stage contracts are a mixture of Chinese and foreign manufacturers. Altogether there are 10 winners out of 12 original bidders. Domestic firms, however, only make up a disappointing 10% of the orders. Inadequate technology and lack of experience are the likely reason why domestic firms did so badly. There are cooperation agreements between nine out of the 10 successful bidders and the list of alliances is as follows: Datang / Lucent Datang / Nortel Ericsson / Huawei Jinpeng / Motorola Shanghai Bell / Samsung ZTE Corporation Alcatel Holds a 32% Stake in Shanghai Bell. Qualcomm, however, is seen as the real winner. It will collect licence fees on all CDMA equipment and mobile handsets in China. In May 2001 Qualcomm signed its first commercial licence with ZTE, enabling it to manufacture CDMA network equipment for domestic sales and export (). The Chinese domestic firms pay a royalty fee of 2.65% to Qualcomm for handsets and 1% for network equipment. This is low for Qualcomm whose royalty fee can be as high as 8%. Benefits and Threats The introduction of CDMA will be a further impetus to China's cellular growth although it could cannibalise China Unicom's GSM market share with churn from its GSM network. The MII is not expected to allow separate pricing for CDMA or GSM services. Investors are uncertain about the rationale of China Unicom running two separate networks that offer similar services to consumers although there are advantages of CDMA such as the ability, in the short term, to enable higher data transmission speeds. Furthermore if the Chinese government offer any mobile licences after 2001, this will cut into China Unicom's market share in the future. China Unicom is coming close to full utilisation of its GSM frequency and CDMA will help enable China Unicom's subscriber base to continue growing in the future. Upgrading to cdma2000 does not require the billion dollar investment that European countries are spending to upgrade GSM to W-CDMA. This means that China Unicom could have a headstart on China Mobile in regard to 3G although it is not certain that cdma2000 will be China Unicom's chosen 3G standard. There are also other standards such as TD-SCDMA or W-CDMA which China Unicom could adopt. Financial Viability of the CDMA Network Financing the CDMA network is a major issue and China United Telecommunications Corporation, China Unicom's parent company, is considering issuing debt and selling equity to domestic investors. China Unicom is in the process of gaining regulatory approval to list some of it shares. Analysts estimate that with a monthly subscriber ARPU of CNY 100, China Unicom's national CDMA network can break even with 2.5 million subscribers. With an ARPU of CNY 80, it would need four million. Any monthly ARPU of below CNY 80 would make it hard for China Unicom's CDMA operations to become profitable. The investment by China Unicom is immense and analysts estimate that China Unicom's initial investment in its CDMA network will reach USD 8 billion by 2005 (excluding any upgrade costs to 3G). Returns, however, could total USD 12 billion by end December 2005. (USD 1 = CNY 8.28) - Eric -