Efforts for development of CDMA business in China are being intensified as SK Telecom initiates joint sourcing of handsets with China Unicom.

SK Telecom and China Unicom (CEO Chang Xiaobing, www.chinaunicom.com) revealed on the 26th that Korea and China had decided on “joint handset sourcing” in order to target the two markets of Korea and China.

This is the first time that any conspicuous achievements have been announced since the strategic alliance between SK Telecom and China Unicom.

On June 21, SK Telecom established a contract for purchase of CBs worth USD 1 billion issued by China Unicom Limited, a company listed in Hong Kong. Also, through the establishment of a “Strategic Alliance for CDMA Services” with China Unicom, SK Telecom has announced alliance and cooperation in joint handset sourcing, joint development of additional services, joint platform development, marketing / distribution, CRM, and network.

As a result, for specific implementation of the 6 areas of strategic alliance between SK Telecom and China Unicom, a consultation group and task force consisting of 50 working level members from both companies are in operation, with discussions on specific ways of cooperation through mutual provision of consulting in each area, sharing of expertise, provision of market information, etc.

On September 11, a workshop was held in Busan for two days on the 6 areas of strategic partnership with participation by the CEOs of the two companies, with an agreement to make it a priority to pursue joint handset sourcing.

Through such an agreement, SK Telecom and China Unicom has agreed to source joint handsets of 6 types in the first half of 2007 for the Korea and China markets, and plan to continue expanding the supply of model types and volume by 2008.

The 6 types of joint sourcing handset models released in the first half of 2007 are subject to discussion among the 3 handset manufacturers, Samsung, LG, and Motorola, mostly targeting the mid-to-high-end market in China, with differentiated handsets based on CDMA20001x network with applications such as high quality LCD, 2 Mega Camera, and Bluetooth.

Going forward, in order to target the high-end and low-end markets of both countries, other than the 3 handset companies, diverse handset line-ups are planned for deployment upon discussion between Korean, Chinese and foreign handset makers. Through cooperation between the two companies, joint supply of mid-to-low priced models aimed at the China and Vietnam markets are also planned.

Through the joint sourcing of handsets, SK Telecom expects the acquisition of “handset price competitiveness through an economy of scale”, along with the differentiated wireless Internet and VAS of CDMA services that target the 20 million SK Telecom subscribers and 35 million China Unicom subscribers. Moreover, it is expected that this will contribute to the expansion of CDMA services within China.
SK Telecom’s CEO Shin-Bae Kim remarked, “It is quite significant that since the strategic alliance with China Unicom, we have been able to overcome various difficulties, such as the difference in the telecommunications environment of the two countries, to acquire handset competitiveness, which is the most important. As our first achievement comes based on the devoted work of the two companies, we hope that the joint sourcing of handsets will lead to a dramatic development of China Unicom’s CDMA business and a turning point for China’s CDMA business.

China Unicom’s CEO Chang Xiaobing remarked, “The joint sourcing of handsets will be an important basis for development of CDMA operations, and we will provide full support so that the diverse strategic ties between the two companies can bear fruit.”

SK Telecom and China Unicom revealed that other than joint handset sourcing, they are undergoing discussion for achieving results in other areas of cooperation under the strategic tie-up, such as joint VAS development, joint platform development, marketing/distribution, CRM, network, etc.

Alcatel (Paris: CGEP.PA and NYSE: ALA) today announced that Jiangsu Telecom, a subsidiary of China Telecom, has selected Alcatel’s IP service routing solution to expand and optimize its metropolitan area network and broaden its IP-based data service portfolio. The Alcatel solution will enable Jiangsu Telecom to offer faster, highly reliable, and premium data services for consumers and enterprises across Jiangsu Province. The contract was won through Alcatel Shanghai Bell, Alcatel’s flagship Chinese company.

Jiangsu Telecom will deploy the Alcatel 7750 Service Router (SR) in the province’s four major cities, Nanjing, Wuxi, Yangzhou and Zhenjiang, where they anticipate fast-paced growth in demand from the consumer and business markets for advanced user-centric broadband services.

Upon completion of the project by the end of this year, Jiangsu Telecom will be able to deliver multiple services from a single IP network infrastructure, and with the Quality of Service (QoS) required to meet strict Service Level Agreements. Services include high speed Internet access for residential users as well as Layer 2 and 3 virtual private network (VPN) services for enterprises.

“This contract establishes Alcatel as the leading IP supplier to Jiangsu Telecom,” said Gerard Dega, President of Alcatel Shanghai Bell. “The Alcatel IP solution has the capability to ensure non-stop service delivery which is critical to meet today’s stringent market expectations. It also accelerates time to market through rapid service provisioning, ensuring service providers can move quickly to capture new market opportunities.”

Today, all major Chinese operators including China Telecom, China Unicom, China Netcom and China Mobile have selected the Alcatel 7750 Service Router to optimize the delivery of high-performance carrier data, voice and video services. China Telecom alone has selected the solution in 17 major provinces, including Xinjiang, Tibet, Qinghai, Gansu, Ningxia, Shaanxi, Guangdong, Shanghai, Jiangsu, Anhui, Hubei, Fujian, Jiangxi, Henan, Sichuan, Liaoning and Guizhou. According to Synergy Research Group, Alcatel is #2 in the Services Edge Router category in Q1 2006, with 18% market share, following four consecutive quarters of market share gain.

The CDMA Development Group (CDG) commended SK Telecom (SKT) on its $1 billion investment in China Unicom. SKT is South Korea’s largest wireless operator, and the investment demonstrates that CDMA2000® is a thriving technology in Korea and is expected to provide a return on investment in China.

SKT has purchased a 6.67% stake in China Unicom with approximately $1 billion in convertible bonds. The alliance with SK Telecom will fortify China Unicom’s CDMA2000 business by providing additional working capital for advanced mobile handsets, network enhancements, and value-added services. China Unicom is China’s second largest mobile operator, and claims 34% of the country’s 415 million-strong subscriber base.

“SKT’s investment in China Unicom marks SKT’s tremendous success and confidence in rolling out advanced CDMA2000 voice, broadband data and multimedia services in markets outside of Korea,” said Perry LaForge, executive director of the CDG. “It also highlights CDMA2000’s proliferation across the world’s most lucrative long-term potential markets.” The powerful combination of Korea’s вЂ?know-how’ and China’s enormous market potential will further contribute to the rapid migration from 2G to 3G mobile communications.

SKT can be considered one of the most successful operators in the world, through its substantial earnings in Korea coming from around 20 million subscribers who are generating an average revenue per user (ARPU) of $45.70 USD. Its execution in Korea, one of the most competitive markets, demonstrates the power of its leadership, market execution and technology selection. It’s entry in the Chinese telecommunication market, through an exclusive strategic alliance framework agreement with China Unicom, further shows SKT’s commitment towards significantly strengthening the presence of CDMA2000 in China and maximizing its earnings within the global marketplace.

According to Shin-bae Kim, the CEO of SK Telecom, “The combination of the world’s largest market and the world’s finest technology will set the standard for mobile communications worldwide. Our partnership with China Unicom marks a turning point for China’s CDMA business.”