Manufacturer raises funds to be first to produce CDMA equipment in China

Mobile Phone News, August 5, 1996

Motorola Inc.'s [MOT] strategic partner in China, Eastern Communications Co. Ltd., hopes to raise $68 million through the sale of 29.4 percent of its shares on the Shanghai stock exchange. Part of the proceeds will be used to install China's first CDMA production facility ahead of the launch of commercial services next year.

Eastern, a unit of Hangzhou Communications Co., supplies 22 percent of China's mobile network equipment. It is also the country's second largest handset manufacturer, with a 21 percent market share. Company officials said they plan to begin assembly of CDMA infrastructure equipment by the end of this year and to start production of CDMA mobile handsets next summer.

Funds raised from the share sale also will be used for the expansion of Eastern's global system for mobile communications (GSM) and total access communications service (TACS) production facilities. Eastern will be the third subsidiary of the Ministry of Posts and Telecommunications (MPT) to achieve a stock exchange listing. The others are Chengdu Telecommunications and the Shanghai Posts and Telecommunications Co.

Lack of radio spectrum for GSM services in the major cities will fuel demand for CDMA, according to industry analysts. The MPT is conducting CDMA network trials in Zhejiang, Fujian, Guangdong and Shaanxi provinces; the first commercial CDMA network in China will be launched in Fujian early next year.

China's cellular subscriber base is growing 38 percent a year, and network operators are projected to take on upwards of 2 million new customers this year, according to Texas-based Salvaggio Research Associates. By 2005, London-based CIT Research Ltd. projects China will have 34 million cellular subscribers.

China's State Radio Regulatory Commission is set to finalize nationwide radio frequency assignments for CDMA cellular, personal communications services (PCS) and cordless access services by the end of this year. The MPT already has reached agreement with the People's Liberation Army to use 10 MHz of military spectrum in the 800 Mhz band to offer public cellular services.

China also has begun its first 1.9 GHz CDMA trials in Fujian for wireless local loop (WLL) services. Similar WLL trials are due to be staged in Shanghai, Jiangsu and Tianjin.

...Taiwan To Review Tender Regulations

Taiwan has agreed to review its May 31 regulations governing new mobile telecom franchises, which include three cellular licenses, after the U.S. trade representative (USTR) argued they constituted an unfair disincentive to international bidders.

The U.S. delegation, led by USTR senior adviser David Burns, argued that Taiwan's proposed 11.5 percent return on investment cap for private wireless operators was unprecedented in other competitive markets. The U.S. delegation also complained that proposed interconnection rates for operators of GSM and PCS services were significantly higher than in other countries. Under current guidelines, there is also a threat of predatory pricing and cross-subsidization by state telecom monopoly Chung Hwa Telecommunications Corp., according to U.S. officials.

Several major international players declared an interest in bidding with local partners for the 53 wireless licenses, including AirTouch Communications [ATI], Bell Atlantic Corp. [BEL], NYNEX Corp. [NYN], U S WEST Communications [USW], Singapore Telecom, Hong Kong Telecom, Sweden's Telia and AT&T Corp. [T].