China Unicom to Invite CDMA Bidding

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Last updated at: (Beijing Time) Wednesday, July 24, 2002

China Unicom to Invite CDMA Bidding

Upgrading China Unicom's CDMA (code division multiple access) network will likely give the beleaguered industry a shot in the arm later this year.

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Upgrading China Unicom's CDMA (code division multiple access) network will likely give the beleaguered industry a shot in the arm later this year.

China Unicom, the country's second largest mobile telecom carrier, launched its CDMA network on January 8. It is now busy conducting field trials for equipment from different telecom equipment vendors.

Sources close to China Unicom said bidding will start soon on equipment procurement for the network upgrade.

The company spent more than 24 billion yuan (US$2.9 billion) last year on the first phase of construction of the CDMA network. The upcoming upgrade will also cost the company billions of yuan, though an exact figure was not available, officials said.

In last year's equipment purchasing of China Unicom, international giants, including Motorola, Nortel, Ericsson and Lucent, jointly collected 70 per cent of the contracts. Domestic vendors ZTE (Zhongxing), Huawei, Datang, Jinpeng and Dongfang shared the remaining 30 per cent.

All the companies that had interests in the first phase of construction want to expand their shares in the network upgrade and have, therefore, pushed forward competition among themselves.

Sources said domestic companies may get bigger shares this time because they offer reliable quality and major price advantages.

Because of shrinking global investment in the telecom sector, China Unicom's procurement has become particularly valuable to equipment vendors.

Almost all international telecom equipment vendors are suffering heavy losses because many operators have stopped buying new equipment.

But China's telecom market, especially its mobile sector, maintained a steady growth in the first half of the year with more than 5 million new users a month.

Unicom's CDMA network uses technology different from the GSM (global system for mobile communications) networks that support China's 176 million mobile phone users. CDMA reportedly has higher voice quality and emits less radiation.

After upgrading to the 2.5 generation, or CDMA1X, more value-added services will be available on CDMA mobile phones, such as Internet browsing, position locationing and multimedia messaging.

China Unicom officials said they hope to attract more customers in the short term to reverse the disappointment expressed by its overseas shareholders. After CDMA's debut in January, its slow customer growth irked investors and recently prompted them to sell off Unicom shares. The move drove the share price to a historical low of less than 77 US cents.

Fewer than 1 million people now use CDMA mobile phones in the country, yet the company has set a lofty target of 7 million for the year.

Prices of CDMA handsets dropped significantly recently, which gives people an incentive to buy, Unicom executives said.

Lu Jianguo, vice-president of China Unicom, said the market will start to fly when the price of terminals drops to US$200. Now is the time, he said.

The dominant mobile carrier, China Mobile, has already upgraded its network to 2.5 generation and said it will provide multimedia messaging services on October 1.

China Mobile may also make some big orders later this year to support the new services, industry insiders said.

Those orders would help the telecom equipment market improve as well.

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