China Development Set to Go, CDMA Group Says

HONG KONG (03/30/2000) - Two major competitors in China's telecom market are set to develop wide-ranging Code Division Multiple Access (CDMA) services in the country, an official of a CDMA industry group said today.

Both China United Communications Co. (China Unicom) and another newly-emerging provider, Century Mobile Communication Corp., have received approval to build and operate CDMA networks in China, said Terry Yen, director of Asia-Pacific projects at the CDMA Development Group (CDG).

Unicom last year signed a network-building deal with Qualcomm Inc., but deployment reportedly had been delayed and observers had raised concerns it would be held up by the government. Century Mobile is affiliated with the People's Liberation Army (PLA), which has been ordered not to operate businesses.

CDG issued a statement this week pointing out the comments of Chinese Premier Zhu Rongji earlier this month, quoted from the Xinhua News Agency, in which he denied reports that the government had banned CDMA development. Zhu said the government had decided to deploy a CDMA network and had appointed Unicom to introduce the technology, according to the statement.

Unicom plans to serve as many as 10 million subscribers on the network by the end of this year, the company said when its deal with Qualcomm was announced early last month. [See "Qualcomm, China Unicom Sign Deal for CDMA," Feb. 2.]Unicom already operates a GSM (global system for mobile communication) network in China. This week it announced it will introduce the first GSM systems to China's Shandong province, Century Mobile now operates a CDMA network it took over from Great Wall Communications which serves fewer than 500,000 subscribers, and is seeking equipment partners to expand its coverage, according to Yen. The company has received government approval to build and run a mobile network, he said.

Although the PLA has contributed its radio spectrum to the venture, it will not be the operator, Yen added.

The addition of Century would bring another potentially huge player to China's mobile telecom market, now limited to Unicom and China Mobile Communications Corp., which was spun off from state-run fixed-line incumbent China Telecom.

One analyst said that in China, where wired infrastructure is limited and the ratio of phones to population is only a fraction of the number in developed countries, there is room for all three mobile providers to grow.

"Given the growth and price points of wireless, mobile will be the mechanism of choice compared to wire line within a couple of years," said Geoff Johnson, an analyst at Gartner Group Inc., in Brisbane, Australia.

CDG's Yen said there was a lag before Unicom began its work because the deal with Qualcomm had been concluded so quickly.

"Everyone needed to take a step back and make sure everything was in place before they went ahead with the implementation," Yen said.

Other observers, including Johnson, believe it was caused by changes in government policy. Johnson acknowledged that Zhu's statement is likely to be the last word.

In response to a query last week, Qualcomm spokeswoman Christine Trimble said Qualcomm had never received word from Beijing on a cancellation or delay in the project.

The deal represents the way China wants to go in telecom development because Qualcomm is licensing intellectual property to Chinese companies for their own use, Yen said. GSM networks have had less local involvement, he said.

"CDMA is going to be much more balanced in terms of import and export," Yen said.

Other benefits of CDMA over GSM are that it can reach more users with a given amount of radio spectrum and it will allow for an easier transition to third-generation networks for broadband data services, Johnson said.

CDG, in Costa Mesa, California, can be reached at +1-888-800-2362 or online at http://www.cdg.org.

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