Unicom eyeing overseas carriers
China Unicom, the mainland's sole CDMA mobile network operator, is gearing up its global expansion efforts in the hope of becoming a global class leader within five years.
The strategy will focus on taking small stakes in emerging markets carriers and collaborative efforts aimed at increasing CDMA operators' bargaining power with equipment vendors.
Unicom also aims to force technology standardisation and facilitate bulk handset purchases among operators in these markets, a move that if successful could squeeze the margins of handset makers.
China Unicom chairman Wang Jianzhou said the carrier was in talks to take a stake in Romania's POSTelecom, a new operator established last year by the country's postal service as part of a deregulation programme.
If successful, it would be China Unicom's first investment in a foreign carrier and Mr Wang said other investments could be made if opportunities arose.
'This is in line with the government policy of encouraging Chinese enterprises to seek international expansion,' he said.
'We certainly support the government's policy. For Unicom's own development, [international expansion] is a necessary step to lift our management competence and our influence in global markets,' he said.
Unicom has a five-year goal to develop as a world class telecommunications carrier in terms of profitability and management quality.
It will also join Shenzhen-based telecommunications equipment vendor ZTE Corp - which has equipment supply contracts worth US$244 million - in building an internet-protocol fixed-line network for POSTelecom.
Unicom will also examine the possibility of an equity partnership through a consultancy arrangement with the Romanian carrier.
POSTelecom has earmarked a 29 per cent stake for Unicom, but Mr Wang said he would proceed only if convinced that the deal enhanced earnings for the Hong Kong-listed red chip.
With gross domestic product per capita of about US$2,000, Romania has about 13 million fixed-line and mobile phone users compared with China's more than 421 million users as recorded at the end of 2002.
Led by the mainland's No4 telecommunications carrier, China Network Communications Corp (China Netcom) - which also plans a Hong Kong share offering - mainland carriers are looking to pursue international expansion.
China Netcom is in talks to potentially buy PCCW's fixed-line assets in Hong Kong and last month completed its purchase of bankrupt underseas cable operator Asia Global Crossing.
'We're inviting CDMA operators to attend a big meeting [in Beijing] this October to discuss the alliance,' Mr Wang said.
'If the [CDMA] operators can standardise networks and jointly purchase handsets in bulk volume, we can bring down the prices [of handsets] and Qualcomm's chipsets.'
He said the firm had received a positive response from smaller CDMA carriers on the proposal.
Over the past two years, China Unicom has pursued a bulk-buying strategy that has resulted in a lowering of its average unit cost for CDMA handsets from more than 2,500 yuan to less than 1,000 yuan.
Unicom has lobbied operators in Thailand, Indonesia, India and Latin America to adopt the CDMA standard used in China, a move that it hopes will reinforce its ambitions at industry leadership.
'CDMA is a very good technology, but every country's [CDMA networks] have different standards and specifications,' Mr Wang said.
The lack of a common standard and platform among CDMA operators resulted in technological hiccups in roaming.
Unicom has vocally supported the Hong Kong government's plan to issue a fifth third-generation mobile licence using CDMA2000, a standard supported by Unicom and proposed partly to increase roaming abilities for next generation services.
Local operators, led by Hutchison Telecom, have opposed the introduction of a new 3G licence, citing a fragmented marketplace and saturated competition.
