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KDDI, China Unicom to Form Telecoms Alliance
Japan's second-largest telecoms firm, KDDI Corp, has agreed to form a comprehensive alliance focused on mobile phones with a parent company of China Unicom Ltd , a source close to the firm said on Tuesday.
KDDI and China's second biggest mainland telecom operator will cooperate in various fields including Internet access services and mobile phone technologies, the source, who declined to be identified, told Reuters.
The source said the alliance would not involve capital investment.
China Unicom's spokeswoman in Hong Kong said there would be a formal signing tonight in Beijing between China Unicom Group, which owns 77 percent of China Unicom, and KDDI.
Analysts in Tokyo welcomed the news as it would give KDDI a foothold in China's vast market, which many see as harbouring huge potential.
"There's an upside potential, a potential of the scale of the market," said Kate Lye, a telecoms analyst at UBS Warburg Dillon Read.
Merrill Lynch telecoms analyst Agnes Ho said she expected the tie-up would involve some sort of reciprocal agreement such as roaming.
"It demonstrates that Unicom is actually trying to expand its reciprocal relationships with these international carriers to get the best prices for their connectivity," she said.
Boost competitiveness The tie-up is designed to boost competitiveness against bigger rivals such as Japan's NTT DoCoMo Inc and Britain's Vodafone Group Plc, which have been expanding aggressively in Asia, Europe and North America.
China Unicom, which had been searching for a major partner, would potentially get access to a source of capital that could help it raise billions of dollars to buy networks in 18 provinces.
KDDI uses CDMA (code division multiple access) wireless technology for its existing network of 8.7 million users while China Unicom's parent company is building a 15.15 million capacity CDMA network that is due to be operational by early 2002.
KDDI currently offers roaming services in the United States, Canada, Korea, Hong Kong and Australia.
China Unicom Group has said it aims to have 100 million mobile subscribers by 2005, 40 million of them on a new CDMA network now under construction.
3G race UBS' Lye said expanding roaming partners with CDMA technology should help KDDI cut costs.
"Strengthening of the camp of CDMA, we think it's very positive," she said.
Analysts also said an operational tie-up with no capital investment was positive for KDDI, which is currently laden with 2 trillion yen in debt.
In January, KDDI said it would pull out of the Brazilian market by selling its 48-percent stake in Global Telecom S.A., a mobile operator in Brazil.
Meanwhile, DoCoMo, keen on getting a foothold in China, has yet to sign a deal with a mainland operator although it recently said it would increase its stake in Hutchison Telephone, a unit of Hutchison Whampoa Ltd , to 25.37 percent from 19 percent.
On March 30, DoCoMo launched a trial third-generation (3G) mobile phone service, securing its place as frontrunner in the race to provide services such as videoconferencing and fast Net access on mobile phones. The rollout puts it well ahead of its global competitors.
KDDI plans to launch an upgraded CDMA service this year that rivals DoCoMo's 3G service. The alliance could help it spread the use of the same 3G format in the Chinese market.
Shares in KDDI closed at 563,000 yen on Tuesday, down 0.35 percent, while China Unicom shares were up 1.6 percent at Hk$12.75.
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