China United Telecommunications (China Unicom) is scrapping plans to launch a narrowband CDMA-based (Code Division Multiple Access) cellular telephone network and instead turning its attention to a third generation system, the official China Daily Business Weekly reports.
Quoting a senior official from China Unicom the newspaper said the company has put on hold its plans to build a 100 billion yuan ($US12.1 billion) second-generation CDMA system in preference for a third-generation CDMA 2000 system.
"I think it makes sense," said Bertrand Bidaud, director for telecommunications research for Asia-Pacific at Gartner Group. "In many respects CDMA would have made sense between six and 12 months ago but now it makes less and less sense to invest in a second generation system."
He also said the disclosure is a good sign for potential shareholders of China Unicom. The company is currently planning an initial public offering and its willingness to make public its latest plans for CDMA is a positive move, said the analyst.
"They are trying to give a clear view to potential investors about what they will do. It would have been a big question mark otherwise," he said.
China Unicom's CDMA plans have been a sensitive subject in recent months. Wu Jichuan, China's Minister of Information Industry, signed a much heralded deal with US Secretary of Commerce William Daley in April 1999 to adopt the CDMA system for a second national cellular network but, since the deal was signed, China Unicom has remained largely quiet on its plans and no contracts for the technology have been forthcoming.
The US was pushing China to adopt CDMA for its second cellular network in preference to GSM (Global System for Mobile Communications) because Qualcomm and other US companies stand to gain more from the CDMA adoption than from that of GSM, a system in which European companies largely lead the market. While the adoption of CDMA 2000 means US companies will still have a role to play in the Chinese mobile market, it delays further the signing of commercial deals.
The newspaper also quoted sources as saying the trial CDMA systems operating in four Chinese cities run by Great Wall Telecom, an affiliated company of the People's Liberation Army, will be eventually allocated to China Unicom.