At long last

Qualcomm/China Unicom deal OK'd by Chinese ministry Hong Kong - Wireless executives during last week's International Telecommunication Union Telecom Asia 2000 show in Hong Kong voiced confidence that China Unicom would move quickly to deploy CDMA technology - a savory prospect for U.S. firms that want to put mobile phones into the hands of China's 1.27 billion people, only 70 million of which use mobile phones today.

The confidence followed CDMA innovator Qualcomm's announcement that it signed a memorandum of understanding (MOU) with China's Ministry of Information Industry, confirming the MII's support of Qualcomm's CDMA licensing framework agreement made with Unicom in January. The MOU also supports deployment of a nationwide CDMA-based network with continued migration to more advanced CDMA technologies such as 1XRTT services, said Qualcomm executives.

"I've said before I was cautiously optimistic," Qualcomm Chairman and CEO Irwin Jacobs said during a press conference. "I'm now optimistic.... The MII is looking for increased deployment in China. There are other issues such as financial issues they are trying to clear up."

Qualcomm investors have remained cautious as they await more concrete signs that Unicom is certain to deploy the technology. However, Qualcomm's stock soared on the news. It ended the day up $7, closing at $90. It jumped almost $10 the following day, closing at $99.625 on Tuesday.

However, Unicom, which in recent weeks has signaled its intention to deploy the technology, has yet to issue any tenders or commit to a timetable to expand beyond the trial CDMA networks that it inherited from Great Wall Networks. In June 1999, Unicom detailed aggressive plans for deploying the technology but was thwarted by numerous delays, ranging from licensing holdups to paperwork problems with agencies.

"Unicom has picked up the pace," said Scott Erickson, senior vice president of global marketing and business development for Lucent Technologies. "It is going through evaluations and scheduling. Another tender process should come soon."

Lucent and its competitors now are reassembling teams in China. Most vendors have established joint ventures with Chinese vendors because the Chinese government clearly wants its own vendors to have technology expertise. Qualcomm already has negotiated R&D deals with several local manufacturers

Nortel Networks said it is well-positioned through a strategic alliance with Datung, the first Chinese company fully certified to provide CDMA infrastructure to Chinese operators.

"Everyone is drooling over China," said Robert Mao, Nortel's president and CEO of Greater China. "This time is for real."

Terry Yen, the CDMA Development Group's director of Asia Pacific programs, said Unicom likely will issue tenders near Christmas.

In related news, MII Minister Wu Jichuan discussed the MII's regulatory plans for China's telecommunications industry as the country seeks to join the World Trade Organization by January. Wu said the Chinese government is in the process of launching communications legislation that will regulate foreign investment and pricing of services. Starting in 2003, foreign operators can acquire up to 25% of a joint venture with a Chinese carrier to provide services. By 2006, the cap on foreign services will rise to 49%. The details of how foreign investors will be allowed into China remains to be seen.

"China's entry [into the WTO] will be completed by January," Wu said. "Based on that, we will formulate a provision for overseas regulation.... We cannot give the specifics."

The Chinese government also is considering changes in the tariffs on services, including a move to a calling-party-pays method.

"I believe any change in the telecom tariff will be a complicated matter," Wu said. "The telecom tariff involves sharing of costs. Costs paid will be distributed among operators.... We must hold a public hearing about this.... All telecom carriers should provide better quality at affordable prices."