China telecom companies to use Qualcomm's technology

Cell phone company Qualcomm will allow Chinese telecommunications companies to use its wireless technology, clearing the way for Qualcomm's standard to break into the Chinese market.

Qualcomm announced plans today to allow Chinese telecommunications companies to use the company's wireless technology, clearing the way for Qualcomm's standard to finally break into the lucrative Chinese market and perhaps the rest of Asia.

The pact with China Unicom, the country's second-largest government-owned communications company, lays the groundwork for Chinese wireless equipment manufacturers to make mobile handsets and network infrastructure using Qualcomm's intellectual property and for Chinese carriers to deploy networks based on the technology.

China Unicom negotiated the deal on behalf of the Chinese government and other carriers and equipment makers.

The deal marks a significant win for Qualcomm, which owns the rights to--and collects royalty fees from companies that utilize--a digital wireless voice and data transmission method known as code division multiple access, or CDMA. Qualcomm's technology has grown in popularity in North America where carriers are drawn to its efficient use of wireless spectrum and its ability to carry data and Internet traffic at high speeds.

But virtually all phones in China and much of the rest of Asia and Europe operate on a competing protocol known as Global System for Mobile Communications, or GSM. Analysts and wireless industry executives expect China to present an enormous market opportunity for equipment makers and communications companies. Some analysts believe other countries, such as Thailand and Taiwan may eventually follow China's lead when they upgrade their wireless networks.

"This significant agreement allows for the rapid expansion of CDMA in China and supports China Unicom's plans for a nationwide deployment of CDMA," Qualcomm chief executive Irwin Jacobs said in a statement.

China Unicom plans to deploy a nationwide CDMA wireless network this year, with the installation of network equipment expected to begin "promptly," according to Qualcomm.

The company only yesterday confirmed that it was in negotiations with China Unicom, saying executives were pleased with the progress of the talks. Chinese telecommunications and government officials and Qualcomm executives have longed for a deal for years, but regulatory restrictions in China and a less-mature CDMA technology prevented a deal until now, analysts said.

"It's not any different now than it was three years ago. It's just that three years ago (Qualcomm) couldn't get in (to China)," said Pete Peterson, a financial analyst at Prudential Volpe Technology Group.

Qualcomm shares have traded as high as $200 and as low as $7.63 in the past year.