02-03-99 Samsung, Hutchison join hands to introduce CDMA in Australia
By Yu Kun-ha Staff reporter
Samsung Electronics has teamed up with Hutchison Telecom, a global player in wireless services, to introduce CDMA (code division multiple access) in Australia, the venue of the 2000 Summer Olympics. Samsung will supply CDMA systems and handsets worth $210 million to Hutchison Telecommunications Australia Ltd. (HTAL), a member of Hutchison Telecom Group based in Hong Kong, in time for the Olympic Games in Sydney. The two companies, which had already concluded a contract last December, Monday celebrated their partnership and resolved to cooperate in the future at the "CDMA World-class Experts" meeting in Seoul.
The event at the Shilla Hotel was a who's who of the Korean telecommunications industry, as well as representatives of the two companies, reflecting the deal's significance for the entire industry. It also provided the stage for Minister of Information and Communication Namgoong Suek to propose an international organization of CDMA service providers to promote a global roaming service and further disseminate CDMA technology. "The number of countries adopting CDMA is growing rapidly, with CDMA subscribers forecast to surpass GSM users within five years," the minister said. "It is to the benefit of CDMA users worldwide that service providers get together to start a roaming service."
The minister's proposal was welcomed by Barry Robert-Thomson, HTAL's CEO and managing director. "It's a very encouraging suggestion. If Korean service providers initiate efforts to create such an organization, I will fully support it." When it comes to CDMA service, Korea is the undisputed leader. With about 14 million CDMA subscribers, it now accounts for some 70 percent of the world's total CDMA users estimated at 20 million. It is also the country which first commercialized CDMA in 1997, alleviating the skepticism about the new technology's viability.
Based on their pioneering role in launching commercial CDMA service, Korean telecom equipment vendors have emerged as major players in the global CDMA market. They have proved their prowess with huge deals from service providers around the world. Korean companies' success, however, has so far been limited to handsets. While they could establish themselves as competent handset producers, they have been unable to push into the CDMA system market. It is not that their systems are not as reliable as foreign products, but as total newcomers in the global system market, it took time for them to obtain recognition, especially from service providers in advanced countries.
This recognition came in the form of a contract between Samsung and Hutchison. The deal represents the first major export of Korean-made CDMA systems to an advanced market. Prior, Samsung provided commercial systems to Russia and pilot systems to China, but the two shipments were small. "Samsung's contract with Hutchison signifies that Korean companies are now gaining global recognition in CDMA systems, as well as handsets," said Lee Kyo-yong, assistant minister of information and technology. "I hope the deal will boost Korean-made CDMA products in world markets," said Samsung president Yun Jong-yong. "It should serve as the impetus for further inroads into such important markets as North and Latin America, China and Southeast Asia."
In the telecom equipment market, the systems business is not necessarily more profitable than the handset business. Korean companies' efforts to enter the systems business is explained by the fact that a service provider who purchases systems from an equipment vendor tends to place orders for handsets from the same vendor. Under the contract with Hutchison, Samsung will not only supply and install systems but provide 70,000 handsets as well. "It's a turn-key project in which Samsung will build the networks, provide technical and maintenance support, and supply additional equipment to expand the system for eight years following the installation of the initial network," said Bae Byung-kwan, Samsung vice president in charge of the Telecommunications Division.
The company won the contract in a hotly contested tender where such telecom powerhouses as Lucent Technologies, Motorola and Nothern Telecom participated. "We chose Samsung because it met the four criteria we put forward," Thomson said. "First, Samsung's offer satisfied our technical specifications. Second, it earned high marks for its commitment to meet our tight launch schedule. Third, we wanted an equipment vendor with proven capabilities. And lastly, Samsung's tender price was competitive." Thomson said Hutchison needs close cooperation with Samsung to offer high-quality service to sophisticated Australian wireless users. "We have to build the world's best network to compete with existing operators. We are relying on Samsung's expertise."
HTAL plans to launch service in April 2000 in Sydney and Melbourne, ahead of the 2000 Summer Olympics. The two areas account for some 60 percent of the entire Australian population. Samsung will supply and install two switching systems and 282 base stations in Sydney and the same number of switching systems and 215 base stations in Melbourne. The systems' combined capacity is 630,000 subscribers. Samsung's advance into Australia offers an opportunity to stage a global sports marketing campaign. The company has already been selected as the official Olympic Partner in the wireless equipment category for the 2000 Olympics. "As an Olympic Partner, we will supply CDMA systems and handsets to the organizing committee," Bae said.
"Hutchison's service in Sydney will further boost Samsung's reputation as a leader in CDMA technology." He noted that Samsung's contract with Hutchison will pave the way for the company to make inroads into other countries that have adopted or are planning to adopt CDMA. "By successfully executing the project, we will show service providers in other countries that Samsung is a reliable and competitive new partner capable of offering service on a turn-key basis," he stressed. Bae expected Samsung's CDMA exports to total $1 billion this year, with handsets expected to account for 80 percent. Last year, it shipped abroad $560 million worth of systems and handsets, more than double the $255 million in 1997. On the domestic market, the company shipped some 3.8 million handsets, accounting for 53 percent of the total handset shipments.
"We expect export conditions will be much better than last year. The number of countries that will use CDMA will increase from 17 last year to 34 this year. In countries where CDMA is already used, demand will increase because service providers will have to expand networks," Bae said. This year will see CDMA penetrate into Central and South America, China, Thailand, some Middle Eastern countries and even Europe, the bastion of GSM, the archrival of CDMA. "Korea's total CDMA exports are expected to top $1.5 billion this year," said an official of the Ministry of Information and Communication. "This figure excludes small equipment companies' handset supply to foreign original equipment manufacturers, including Motorola. When we include this amount, the total will reach $2.5 billion." All this signifies that Korea has created a thriving industry around CDMA. Korea is poised to make another jump in the telecom industry with the planned introduction of third-generation wireless service around 2001.
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