Gun-shy Unicom delays CDMA contracts

Industry watchers say recent U.S.-China political tension has prompted Unicom to delay the CDMA network supply deal

In this story: Bid winners in limbo Political flare up Rolling out the network RELATED STORIES, SITES

By CNN's Kristie Lu Stout

HONG KONG, China (CNN) -- China Unicom has finally selected its CDMA equipment providers, but is slow to sign the $1.7 billion deal.

The signing ceremony between China Unicom and seven telecom equipment suppliers scheduled for last weekend was cancelled at the last minute.

CDMA Code Division Multiple Access -- A wireless standard that allows carriers to cram more traffic across limited airwaves than the competing GSM system

The holdup arrives in a climate of escalating strain between the United States and China after a U.S. spy plane collided with a Chinese fighter jet in April and the United States pledged to keep on helping Taiwan defend itself.

Bid winners in limbo

China Unicom selected Samsung, Motorola, Nortel Networks, Lucent Technologies, Ericsson, and China's Shenzhen Zhongxing Telecom as its equipment suppliers to build a huge CDMA-standard mobile network, according to South Korean media last week.

The Wall Street Journal reported that Alcatel, as well as China's Huawei Technologies, Guangzhou Jinpeng Group, and Datang Telecom were also selected to provide CDMA network equipment gear.

Beijing-based telecom analyst Duncan Clark, who works for consulting firm BDA, says the array of companies and countries represented in Unicom's CDMA supplier line-up is an intentional, and highly political, verdict.

"The contract brings in everybody, domestic Chinese and Korean. It's more of a political gesture to share the wealth, and throw a bone to the U.S.," says Clark.

The bid winners are to supply and install CDMA equipment by September before full commercialization in October, South Korea's Maeil Business Newspaper reported.

Though Unicom has selected the winners of the CDMA equipment bidding, it's shy to finalize the deal.

Political flare up

The Beijing Youth Daily reported that the release of the contract has been delayed due to a need to balance interests of all sides.

Industry watchers say recent political flares have prompted China Unicom to postpone the network supply deal -- not a first for China's second largest mobile operator.

After the U.S. bombing of the Chinese embassy in Belgrade in May 1999, Unicom brought CDMA negotiations with foreign vendors for to a standstill for six months.

"It's been a political football since its inception in 1995 when the first trial CDMA networks were put into place," says Clark. "There have been a lot of delays with restructuring and politics. Look at Qualcomm's stock price -- it's a yo-yo of U.S.-China relationships."

Rolling out the network

China Unicom plans to invest $8.46 billion in its long-awaited CDMA network over three years, according to official Chinese media.

The parent firm will build the CDMA network and plans to lease it to the listed company.

Qualcomm, which holds the lucrative patents on the technology, has long been frustrated by China's off-again, on-again plans to build a CDMA network.

Some analysts have questioned the wisdom of rolling out a vast network using a different standard when China is already dominated by GSM.

For Qualcomm and other vendors, the stakes are massive. China had 85 million mobile users at the end of 2000, and some watchers predict China will surpass the United States as the world's biggest wireless market by the end of this year.

Samsung wins China Unicom CDMA bid
April 27, 2001
Solid earnings seen for China Unicom
April 2, 2001
China Unicom stunted by issue plan
April 4, 2001

The CDMA development group
China Unicom

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