CHICAGO — As overseas companies grabbed the bulk of China Unicom's network infrastructure business in a recent round of bidding, local Chinese companies accelerated their efforts to develop wireless standards and technologies for China's booming telecom market.

China Unicom, the second largest cell phone service provider in China, awarded contracts worth $1.5 billion to several Western companies for the first phase of construction of its code-division multiple-access (CDMA) network. Unicom, the only authorized CDMA network operator in China, plans to establish a network for 50 million subscribers by 2005.

Unicom's first-phase network will use IS-95A technology as a means to keep pace with China Mobile, the dominant carrier in China, which operates a Global System for Mobile Communications network.

To accelerate deployment of its CDMA network, Unicom plans to spin off an independent company to establish and operate the network. The company will adopt a strategy of "small capacity but broad coverage" during the first phase, managers said. The new network will have a capacity of more than 15 million subscribers and will cover about 300 Chinese cities by the end of the year.

Qualcomm win

A big winner in the bidding was Qualcomm Inc. (San Diego), which analysts said benefited from a previous CDMA licensing agreement with China Unicom as well as chip-set sales to Chinese and overseas manufacturers. Other winners included Lucent Technologies, Motorola Inc. and Nortel Networks.

Unicom mandated that all 12 bidders offer the equipment that would allow its network to migrate to the cdma2000 1X standard. Other Unicom technology requirements included support for international roaming and a user identification module card.

The bidding also revealed the importance of joint ventures between Chinese manufacturers and foreign equipment suppliers. Unicom sought bidders that had established joint ventures with local enterprises. Motorola, Lucent, Nortel, Ericsson and Alcatel are all represented by their partners in Hangzhou (Zhejiang Province), Qingdao (Shandong Province), Nanjing (Jiangsu Province) and at Shanghai Bell.

Lucent won the largest wireless-equipment deal, worth more than $400 million for 4 million subscribers in Shanghai, Zhejiang, Guangdong and eight other provinces. Motorola received a $407 million contract for 4 million subscribers in Beijing and 10 other provinces. Nortel and Ericsson won $275 million and $200 million deals, respectively.

For all suppliers, most of the installation will begin in the second half of this year. Some regional networks will be operational by the end of 2001. Up to now, Unicom operated four trial CDMA networks in Beijing, Shanghai, Guangzhou and Xi'an. The networks were taken over from the military.

Although foreign companies dominated the first round of bidding, China's young mobile-infrastructure builders fared relatively well. Six Chinese companies — Capital Info, Datang, EastCom, Great Dragon, Huawei, Jinpeng and ZTE — won smaller contracts from Unicom.

ZTE will supply equipment for 1.44 million subscribers. Besides competition in the areas of radio and switching systems, China's enterprises are developing terminal equipment such as handsets, which are expected to be a huge CDMA business. ZTE, Changhong and others are also developing CDMA handsets.

In parallel with the CDMA network competition, China's government and state-owned enterprises are developing indigenous third-generation (3G) wireless standards and technologies. Datang Group and Siemens Information and Mobile Communication Group recently reported successful trials of homegrown time-division synchronous CDMA technology.

Designed to work in densely populated urban areas, TD-SCDMA offers higher capacity for frequency efficiency and high data rates for Internet access.

Datang Group owns the intellectual-property rights to TD-SCDMA technology. Siemens is the first multinational company to support its development and commercialization. The partners said the first demonstration showed the system is ready to move from lab to marketplace.

The demo used prototype basestations and terminal equipment. Once more hardware and software are ready, the system "will gradually [handle] high-rate communication features like data and multimedia transmission," said Shihe Li, the inventor of TD-SCDMA technology. A TD-SCDMA basestation system with 3G features could debut early next year.