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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting -- Ignore unavailable to you. Want to Upgrade?

To: Ramsey Su who wrote (20844)	3/27/2002 11:48:52 PM
From: Ramsey Su	Read Replies (1) \| Respond to of 197280

chinabyte.com this article almost made my earlier post sound like a setup. It has nothing to do with CHU's earnings report last night nor did it mention anything about subs. However, it clearly states China intent. Why would China, with already the largest GSM network in the world, spend over 20 billion yuan on a new CDMA network? 1) without CDMA, Unicom would not be able to compete with the more mature China Mobile. Believe it or not, those commies actually want competition. 2) the ultimate decision maker, the Chinese Government, has another point of view. With China being the largest market in the world, the domestic name brands have yet been able to be competitive. With so much effort, the domestic suppliers just managed to capture 10% of the market share. The Chinese government is counting on CDMA to give the domestics a chance. 3) so they fixed the RFPs (for the infra). Even though LU ultimately received the biggest orders, all the foreigners must have domestic JV partners before they can participate. For the handsets, it was even more obvious. Of the 19, MOT is the only foreign firm. MOT is at present the largest foreign investor in China and they put forth some serious lobbying. This license did not come cheap for MOT. With such advantage, can the domestic manufacturers perform? 4) for the networks, ZTE and Datang are the clear winners with basestations covering over 10 provinces and 4 provinces respectively. Traditionally, with the magnitude of these contracts, China usually pays a lot of attention to proven name brands. In this case, Unicom is bearing the risk. Furthermore, since CDMA will not have as much coverage as GSM, there are a lot of follow up improvements. So this is going to be a big test for the domestic vendors. 5) As it turned out, the network was secondary. What gave Unicom a big headache was the handsets. We have already beaten this dead horse enough so I won't repeat it here. 6) Now Unicom is faced with the dilemma of hanging in there with the domestic "chosen ones", or open the market up to the foreigners again. If they allow Nokia and Ericy back in, would it then be a repeat of their GSM domination? ------------------- The above is a kind of translated version of the article, though not word for word. Now for my 2 cents. Let us pause for a moment and figure out what is the problem? Network? Nope. It sounds like all the networks are ready though it might not have been tested with enough usuage yet. No consumers? Nope. 5 million new sub adds per month is the envy of any country in the world. Handsets? For IS95, even with the R-UIM card, Samsung, NOK, MOT, Sony-ERICY, LG, Sanyo, KYO ....... can supply enough for every man woman and child in China and have enough to spare. So what is the problem? The problem is clearly the readiness of the domestic manufacturers. While they can in theory make a CDMA handset, these are all FIRST GENERATION products for them. Everything from cost to design to ring tones to multi color plates are yet to be perfected. Unicom and the Chinese Government obviously did not anticipate and did not appreciate how competitive the handset market is. Fortunately, the answer is simple when you control all the parts. Unicom has already made the first move by buying 500K handsets. The second move would most likely be subsidy. They can subsidize the handsets for a generation or two until the domestic manufacturers catch on to more competitive standards. If that doesn't work, they can play with the rates. Great Wall was half the price of GSM and they could have signed up as many subs as they wanted if allowed to do so. That is something they can always fall back on. Finally, they can just coast for a while and concentrate on 1X. Since the competitors are not that far ahead, they may be able to catch up much easier. Now could someone email this to Maria Bartiromo? I like to see her explain it on CNBC tomorrow. Ramsey

To: Ramsey Su who wrote (20844)	3/28/2002 11:51:02 AM
From: David E. Taylor	Read Replies (1) \| Respond to of 197280

Ramsey: Did CHU say anything that we did not already know? One thing I was looking for was how much they intended to spend on the GSM network in 2002. In 2001, total capex was 31.25 billion RMB, of which 20.78 billion RMB - about 2/3 - was spent on the GSM cellular network, while the government (through Unicom New Horizon) spent 24 billion RMB on the initial CDMA network in 2001. For 2002, CHU is projecting capex at 21.72 billion RMB total, so clearly they will be spending less on expanding the GSM network than in 2001, maybe around 14-15 billion (2/3), or maybe as little as 10-12 billion if spending on the other parts of their infrastructure remains constant at the 2001 level. While the press reports have interpreted the reduction in CHU capex as a negative for the future of the CDMA network, IMO it actually is a good sign for the CDMA network, since capex on CDMA will continue to be spent by the parent Unicom Group (i.e. the Chinese government), and not by the operating company. So less spending on the GSM network by CHU means that their emphasis is shifting to the CDMA business. David T.

To: Ramsey Su who wrote (20844)	3/28/2002 12:02:57 PM
From: David E. Taylor	Respond to of 197280

Ramsey: ...You need to do some more homework... I'm already doing a ton...<vbg> ...Do the same exercise for China Mobile... Not as easy - Mobile's website is pretty pathetic compared with Unicom's. Still have to dredge through regulatory financial filings. But (as for Unicom) there is something that doesn't add up in the published reports of Mobile's GSM subs, since there seem to be two quite different sets of numbers, which I would like to try and reconcile. David T.