China Unicom Gets Parental Help Building CDMA Business

Communications Today, Nov 27, 2001

China Unicom [CHU] won't have to buy a CDMA network before it starts offering service on China's first commercial CDMA system, according to the carrier's agreement to lease space on its CDMA network being built by its parent company, China United Telecommunications.

The lease agreement announced last week allows China Unicom, which already operates a GSM network and is the country's No. 2 wireless provider, to test CDMA operations for a year before having an option to buy the network outright. China's first commercial CDMA network is being built by a second China United Telecommunications' subsidiary, Unicom Horizon Mobile Telecommunications.

The agreement calls for China Unicom to pay its parent 25 yuan ($3) a month per CDMA user for up to 4 million users. The carrier said it would lease capacity for at least 2 million users in the first quarter next year and 4 million in the second. Under the lease agreement China Unicom will pay no more than 2.7 billion yuan ($325 million) in 2002 and 6.6 billion yuan ($795 million) in 2003.

The per-user payment is less than a third of the 92.5 yuan ($11.20) average revenue per user (ARPU) generated by China Unicom's GSM customers. That agreement should allow China Unicom to offer CDMA at lower costs, which it will need to do to attract customers not only from China Mobile [CHL] but also from its own GSM operation.

San Diego-based Qualcomm [QCOM] developed CDMA to use bandwidth more efficiently than other digital interfaces. The Chinese Ministry of Information Industry early last year designated China United Telecommunications to negotiate a framework agreement for licensing Qualcomm's intellectual property in China, opening the door for commercial CDMA services in the country. Four trial CDMA networks have been operated by China Telecom and the Chinese army in Beijing, Shanghai, Tianjin and Guangzhou. >TK Infowave Software [IW]: