telecoms business is in a state of rapid change. While
manufacturers such as ZTE are busy expanding into international
markets, telecoms operators at home in China are facing the
prospect of reorganization.
The first hint of that started in
October when — with inevitable government influence
— the largest operators swapped their management
around. This was believed to be part of an attempt to head off
fierce competition from the main competitors over who would get
China's imminent 3G licences.
Wang Jianzhou, until now president
of China Unicom, became president of China Mobile, replacing
Zhang Ligui who retired because of age. On the same day, Wang
Xiaochu left China Mobile, where he was vice president, to
become president of China Telecom.
Meanwhile Chang Xiaobing, former
deputy general manager at China Telecom, has become the new
chairman of China Unicom.
Such senior management changes
could only have occurred with government backing. Although only
China Mobile and China Unicom are licensed mobile operators,
all six of China's big operators, including Netcom, Telecom,
SatCom and TieTong, are vying for 3G licenses from the Beijing
The executive switch could also
improve cooperation between the operators, possibly helping
avoid network construction duplications. But Michael Newlands,
on page 27, also draws attention to suggestions that the
government may be looking at merging operators, reducing the
number in the market while giving each a wider range of
products and services.
China Unicom will be central to any
reorganization. As this management whirl was just about to
start, Global Telecoms Business interviewed vice president Li
Zhengmao. "China Unicom is the only integrated operator in
China," he said.
"We provide mobile services,
including both GSM and CDMA, which is unusual and not easy to
do, and a fixed line business. We provide limited local
telephony services in three provinces — not the whole
country, because it is not our priority strategy to invest in
local telephony. On the fixed line side we provide long
distance services, data communications and internet services to
There's also, he notes, a paging
business, with five million customers. It's China's largest,
but it is well down from 40 million in 2000.
The company's priority is, of
course, investment in its mobile operations. "This is the first
priority of China Unicom over the next couple of years," says
Li. "Almost 85% of our revenue comes from the mobile business.
If we think about our priorities over the next couple of years,
the most important area for China Unicom is to focus more on
the mobile side, the GSM operation and the CDMA operation."
Unicom is one few operators in the
world to run both GSM and CDMA services side by side, something
that increases the complexity of network operations. Why?
"Our basic strategy for the mobile
business is to focus our GSM product on the mass market.
Basically with the GSM product we can provide the subscriber
with voice and short message services — this is the
basic, simple service — but with CDMA we focus on
medium to high-end customers because our CDMA product can
provide much higher speeds for data services and value added
Yet GSM has the advantage that
customers can roam to networks in almost any country in the
world, something that must surely appeal to the increasingly
international Chinese business community?
Unicom has an answer to that, says
Li. "Just two months ago we launched a range of dual mode
handsets. By dual mode we mean both GSM and CDMA,
The first handsets are made by
South Korean company LG, made under licence from Unicom. "It is
our intellectual property, owned by China Unicom for dual mode
handsets," smiles Li, who hints that other manufacturers may
Unicom markets these dual mode
handsets under the brand name World Wind. Motorola and Samsung
are also believed to be making models.
"If you use this phone, you can
receive international roaming services — it doesn't
matter if you are in European countries, or Asian countries, or
South American countries," says Li. "The world has two large
mobile systems, GSM and CDMA. You can put two SIM cards into
this, one for CDMA and one for GSM."
The current version has a switch to
allow users to click between CDMA and GSM, as appropriate.
There will be a subsequent model, he adds, with a single SIM
card. "This card can support both GSM and CDMA for security
Unicom is discussing the phone with
two US companies, says Li. "One is Verizon, the largest CDMA
operator in the world. Today we are the second largest, but
next year we should be larger. And also we have a very good
relationship with Sprint, which is also CDMA. We will provide
roaming services with them."
There is an opportunity here for
dual mode handsets, he hints, when Verizon Wireless or Sprint
customers want a phone that will work in most of the world,
where GSM dominates.
Unicom is close to other CDMA
operators, including both Reliance and Bharti from India.
Indeed, only a couple of hours before Global Telecoms Business
met Li in his Beijing office, senior executives of Bharti were
there with him "to discuss the cooperation issue", says Li.
The biggest uncertainty in the
future of telecoms in China, apart from any drastic merger
policy imposed by the government, is the issue of 3G licences.
When does he think they will be offered?
"I don't think that will be long:
3G has been discussed in China for almost five years," says Li.
"In the near future — six months or 12 months
— the government may give us some answer. The main
issue now is how many licences — that's the most
important issue. There are currently only two mobile operators
but the fixed operators, like China Telecom and China Netcom,
they also want to do 3G. So the number may be four."
But, of course, four operators
might become two, if rumours are accurate.
Next year in
"The second question is when," says
Li. "People think next year may be a good time in China to
start 3G, so next year is our focus. That is the date we think
is quite important."
And the third question? "What kind
of standard each operator may choose," says Li. That's more
complicated in China than in other countries, because Chinese
manufacturers have developed their own 3G version of CDMA,
called TDS-CDMA, which they are touting around in competition
with W CDMA and CDMA 2000 (simplistically, the 3G versions of
GSM and of current CDMA respectively).
"It's very complicated issue," says
Li. "It's not a government issue, it's up to each operator to
make their own decision, because the decision is so important
to shape their future. Each operator will answer. It's
important, especially for China Unicom, because we have GSM and
So which solution would Unicom
choose? "This is a very big issue for China Unicom," says Li.
"Of course we could do two 3G networks." But that would be
expensive, he admits.
"So what is our best solution?" He
holds up the World Wind handset. "This kind of handset can give
the solution. We can build out one 3G network." Offer customers
a multi-standard handset "and users of the other network can
also receive the new network".
Voice and video over
But mobile isn't the only side of
Unicom. The fixed line side of the company is important, says
Li, and not only because it provides the infrastructure linking
the company's cellphone base stations. "Based on this
infrastructure, we also provide some unique services in China.
We are the largest voice over IP supplier in China. Our
backbone network using IP technology is today the most advanced
in China. It's a new network, built in the past five years, and
we are a pioneer in providing video over IP services."
These were launched in the second
half of 2003, "and today we have more than half a million
subscribers already for video over IP services".
Services were launched "across the
country and internationally", he adds. "We provide this service
in Hong Kong, in Singapore, in Taiwan, in Japan and the US.
Because it's an IP service, if you have access to the internet
anywhere in the world you can access the service."
Most of the customers are
businesses, "but the residential customer numbers are growing
very fast, so I personally believe in the next few years the
major incremental addition of video over IP services will come
from residential customers". And, of course, the residential
cake in China is very big indeed.
At the moment video over IP is used
for video telephony, but "television programmes are the next
stage", says Li. "We are carefully looking at them. We are
looking at the progress of IP TV. I am happy to see that many
vendors can provide IP TV equipment to us, so this is what we
are thinking about. In the next couple of years we may start to
He sees the possibility of Unicom
competing in China against the 60-80 channel service offered by
cable and satellite networks. "People want to use interactive
TV on demand. That's important and that can be profitable. This
is what we're looking at. We have a very strong IP
infrastructure that can support this."
To emphasise that point, he notes
that China Unicom carried 20 billion minutes of long distance
voice over IP traffic last year, making it one of the largest
VoIP carriers in the world.
"The next step we are considering
is the possibility to provide voice over IP services to end
customers through next generation networks. We have some trials
in several cities already in China. The technology is
successful, it is good."
But there are regulatory questions,
he adds. If an operator provides local voice over IP telephony
services, it should have a local telephony licence and provide
all the other services associated with local telephony. "There
is a very big impact on the traditional local telephony
operators," concedes Li. "I personally believe that it will be
available in future. People should accept the progress of
technology. People should not be against that."
Of course, though Li didn't say it,
maybe any forthcoming reorganization of Chinese operators will
sort out those contradictions. GTB