KDDI-Unicom deal a coup for CDMA in China

The tie-up gives China Unicom access to KDDI's CDMA expertise

By CNN's Kristie Lu Stout

TOKYO, Japan (CNN) -- Japan's KDDI and China Unicom have signed a knowledge sharing agreement, sealing a pact that analysts say will boost third-generation wireless technology in China.

The deal grants Unicom access to KDDI's expertise in code division multiple access (CDMA) wireless technology, and give KDDI a foothold into China's lucrative market of some 100 million mobile users.

There is also potential for a roaming agreement that would allow KDDI and Unicom subscribers to enjoy access to the partner's market.

"KDDI and China Unicom have finalized the Memorandum of Understanding about our cooperation of technical issues and other business issues about the mobile telecommunication business," KDDI spokesperson Haruhiko Maede told CNN.

A CDMA boost for Unicom

Analysts say the tie-up will be of tremendous assistance to China's number-two mobile operator as it build out its CDMA network across the Mainland.

CDMA is a wireless standard that allows carriers to cram more traffic across limited airwaves than the competing GSM standard than now prevails in China and Europe.

"KDDI is the biggest CDMA network operator in Japan," ABN Amro telecom analyst Joe Locke told CNN. "CDMA is an experience they have that Unicom needs."

Unicom plans to invest $8.46 billion in the CDMA network over three years, according to official Chinese media.

China Mobile, which operates on a GSM network, is currently China's leading provider of mobile services with over 80 percent market share in China. China Unicom, which was chosen by the Ministry of Information Industry in 1999 to create a competitor to China Mobile, commands little over 10 percent of the domestic wireless market with 12.8 million users.

The operator aims to have 100 million mobile subscribers by 2005, with 40 million users accessing its CDMA network.

Competitiveness gain

The KDDI-Unicom tie-up boosts KDDI's competitiveness as bigger rivals NTT DoCoMo and Vodafone expand aggressively in the region.

Last month, Japan's leading mobile operator NTT DoCoMo lifted its stake in Hong Kong's Hutchison Telephone.

DoCoMo said it would pay $30.44 million for an additional 6.37 percent stake in the company, bringing its total stake to 25.37 percent.

The Japanese mobile operator made the move hoping to leverage its board seat and accelerate the launch of third generation wireless services in the Hong Kong market.

Its parent, NTT, has already set up an office in Beijing and is rumored to be talking to Unicom.

NTT DoCoMo recently launched the world's first trial 3G wireless service, securing a lead in next-generation mobile offerings.

KDDI aims to launch its CDMA upgrade to challenge DoCoMo's 3G service this year. An alliance with Unicom could potentially help KDDI broaden the market base of its next-generation upgrade.

Shares in KDDI soared more than 7 percent on Wednesday on news of the Unicom alliance. Investors are also rewarding China Unicom, sending the China operator up 2.76 percent to HK $13.50.