Qualcomm, China Unicom Sign Deal for CDMA

HONG KONG (01/31/2000) - Qualcomm Inc. announced yesterday it has reached agreement with China United Communications Co. (China Unicom), Mainland China's second-largest telecom carrier, for Unicom to build new wireless telecommunications networks based on the Code Division Multiple Access (CDMA) standard.

The agreement, detailed in a statement, also calls for Mainland manufacturers to license Qualcomm's technology and chips to make CDMA phones and switching gear.

The deal is expected to lead to broad deployment of CDMA for the first time in China, where most mobile-phone carriers use GSM (global system for mobile communications) technology.

Unicom plans to promptly begin deployment of a CDMA network with the capacity to serve 10 million subscribers this year, according to Qualcomm.

Sandra Ng, an analyst at International Data Corp. Asia-Pacific, in Singapore, said yesterday that the Mainland market is big enough to support both technologies.

China's Ministry of Information Industry reportedly counted approximately 30.7 million GSM subscribers to China Telecom mobile services in mid-1999, with 7.2 million having signed up in the first half of that year. Unicom's GSM service had approximately 2.7 million subscribers, nearly half of them added just in the first half of 1999.

However, Ng added that CDMA could face a squeeze by the government, which may want to protect investments that incumbent carrier China Telecom has already made in GSM.

"In most parts of Asia, the government can have influence over the adoption rate of technologies, directly or indirectly, and this is especially the case in China," Ng said. "The government could stop Unicom from investing so much in CDMA."

Decisions about future investment will also depend heavily on the next generation of wireless technology, so-called 3G systems, Ng said.

"If 3G came into the market earlier than people expected, they'd be wasting their resources" investing in CDMA or GSM, Ng said.

However, market liberalization expected with China's accession to the World Trade Organization is likely to lead to more competition and more network-building. Both will benefit consumers in the Mainland, she said.

Qualcomm Inc., in San Diego, California, can be reached online at http://www.qualcomm.com.

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