China in massive mobile tech challenge

From Lisa Rose Weaver, China News Digest, Thursday 23 January 2003 Posted: 3:08 AM EST (0808 GMT)

BEIJING, China (CNN)—Seeking to increase their share in the world's biggest mobile phone market, Chinese cell-phone operators in China are coming to grips with a massive technological undertaking.

The project: To roll out the largest mobile phone network in the world using CDMA—Code Division Multiple Access—technology.

U.S.-based Qualcomm Inc, which pioneered CDMA and earns royalties from its use, is hoping its technology will take off in China and is riding on a deal between mobile network provider China Unicom and several partners, including Ericsson Wireless, Lucent Technologies, Nortel Networks and Motorola.

China Unicom hopes CDMA can help it take over from China Mobile as China's number one mobile phone company.

CDMA was first commercially introduced in 1995 and makes use of radio frequency spectrum by converting speech into digital information that is then transmitted as a radio signal over a wireless network. It is the network used in the United States and South Korea.

The more popular GSM—the Global System for Mobile communications—is based on time division.

Most of China's mobile phones run on GSM, the system used in Europe among other countries. But China Unicom has ordered about $1.2 billion in telecom equipment to set up CDMA cell sites and base stations all over China for the network which should be finished by year's end.

Selling CDMA

Of the international partners, Motorola has the biggest share of the deal, and is well aware of all the complexities.

The challenge for China is it's a very big country and by the end of last year it already had 270 million subscribers and then with a very large network deployment and we also have a very tight schedule to implement the network, Motorola China's Ruey Bin Kao says.

Part of the project is the tough task of selling CDMA. China Unicom has had to create a market for the technology, using incentives like free phones and service discounts to raise subscriptions to 7 million so far, the company claims.

But analysts question whether Chinese consumers will pay extra for a higher quality service. China Unicom admits it has not yet earned back the investment it made in the network.

We just want to make use of this kind of promotion in the beginning as CDMA is getting its start in China. But we will phase out these incentives eventually, China Unicom's Zhang Yungao says.

Springboard

The company aims for 20 million CDMA subscribers by the end of the year, on top of its current 38.6 million GSM subscribers (December figures).

Phone dealers say that although the average customer doesn't know what CDMA is, they do say they want it.

I heard that CDMA is environmentally friendly, no matter how long the phone call is you won't get a headache, remarks one potential mobile phone subscriber.

But CDMA markets itself as a springboard for the wireless technologies of the future.

There's a lot of new applications can be deployed so that we also try to provide this service platform to meeting all these value added services, Ruey says, adding that CDMA is a relatively inexpensive leap to the third generation, or 3G, of mobile phones.

As 3G and CDMA takes off, Motorola, China Unicom and others are on the edge of their seat, lured by this market's huge population and bottom line hopes that, eventually, money talks.