BEIJING-China Unicom and Qualcomm signed a landmark agreement in February, paving the way for Chinese manufacturers to get CDMA production licenses. Unicom wants to build a 10 million-line CDMA network this year and is evaluating 12 bidders to supply the equipment.
But barely a week after the agreement was signed, foreign suppliers report that contract negotiations have been put on hold indefinitely on orders from the Chinese government.
Will CDMA finally break through in China?
After more than a year of prevarication, the door finally seemed to be opening wide. In the beginning of 1999, the Chinese government first agreed in trade negotiations with the United States to allow the building of a CDMA network. Suppliers of CDMA equipment were elated for a chance to break the technological monopoly of GSM in China. The dominant operator, China Telecom, operates a GSM network that had 38 million subscribers as of the end of 1999.
Underdog China Unicom, which up to now has been able to capture only a mere 12 percent of the mobile phone market,
received the go-ahead in April 1999 from the all-powerful Ministry of Information Industry (MII) to roll out a CDMA network.
Then, nothing happened. Internal disagreements held back crucial decisions. Moreover, there weren’t any Chinese telecom suppliers licensed by Qualcomm- which owns the intellectual property rights to the CDMA technology-to manufacture CDMA equipment. China balked at leaving the field completely to foreign suppliers.
The Chinese government assigned China Unicom to negotiate licensing matters with Qualcomm. The agreement signed by China Unicom Vice President Wang Jianzhou and Qualcomm CDMA Technologies President Donald Schrock now allows for Chinese companies to obtain manufacturing licenses from Qualcomm to produce CDMA network equipment and terminals. Qualcomm also agreed to joint development of future CDMA technologies with Chinese suppliers and is considering local production of application specific integrated circuits (ASICs) in China.
China Unicom is evaluating 12 manufacturers to supply the equipment for the network, which will be based on the narrowband IS-95 second-generation cdmaOne technology. Three to five companies are likely to be selected, with Chinese companies Datang and Zhongxing also in the running.
As of the end of February, the procurement process was once again on hold. The more time that is lost, the less likely it becomes China Unicom will reach its CDMA capacity target of 10 million by the end of the year and 60 million subscribers by 2005. China may even skip deployment of second-generation equipment and go directly to third-generation CDMA.
Moreover, the Chinese People’s Liberation Army (PLA) is once again trying to wriggle its way into the telecom industry. It was supposed to have divested itself of all its businesses on orders from President and Chairman of the Central Military Commission Jiang Zemin. China Telecom withdrew from its joint venture with the army, China Great Wall Communications, which runs experimental CDMA networks in Beijing, Shanghai, Guangzhou and Xian.
The official press reported the networks were transferred to China Unicom, but now it seems the army is still involved. Hebei Century Mobile Communications Corp., another army-backed company, has built a network in 11 cities in Hubei province, using equipment from Samsung Electronics, and signed up 15,000 subscribers. An MII official confirmed the military has permission to build local CDMA joint ventures.
According to Michael Ricks, president of Ericsson China, the army also canceled meetings to discuss expansion of its network. Competition from the army and delays in network construction could complicate China Unicom’s listing on the stock exchanges of Hong Kong and New York in early April.
The way ahead for CDMA in China still seems riddled with obstacles.
