Microsoft to Sign Pact With China United Telecom

 

BEIJING -- Microsoft Corp. (NasdaqNM:MSFT - News) is aiming to secure a place for its software in the world's largest market for mobile phones by signing a cooperation agreement with China's number two mobile operator

 

The deal calls for Microsoft to use its software to help the Chinese company develop new, data-focused services for its subscribers. A memorandum of agreement will be signed Friday in Beijing by Microsoft Chairman Bill Gates and China United Telecommunications Corp. President Wang Jianzhou.

The agreement, for which financial terms weren't disclosed, is Microsoft's latest step to gain a piece of the next-generation mobile market, in which phones are used for sending e-mails, pictures and music. The effort, which so far has had limited success in the market, faces stiff opposition from the traditional mobile phone makers, such as Nokia Corp. .

State-owned China United Telecom, however, seems ready to take the plunge. According to a Chinese-language statement from Microsoft, the agreement is focused on the CDMA 1x technology, a high-speed variant of the CDMA, or code division multiple access, mobile phone technology. China United is upgrading its existing CDMA network to include the new technology.

Microsoft will supply "support and services" -- including its .NET software -- to develop a system for China United to offer value-added services on its CDMA 1x network.

Microsoft didn't give examples but mentioned exploring services targeted at corporate users. China United is also known to be planning multimedia message service, which enables users to exchange pictures between handsets.

Under the agreement, Microsoft and China United will also jointly promote the use in China of mobile phones based on Microsoft's software, known as Pocket PC Phone Edition.

That is a potentially huge development for Microsoft's mobile software, which, according to International Data Corp. research, ran on just 170,000 of the 420 million mobile phones shipped in 2002. China is expected to add 52 million new mobile users this year to its current 207 million.

But it's unclear exactly how that cooperation might work, as mobile operators in China -- unlike elsewhere -- don't supply mobile phones directly to consumers, who can purchase mobile phone service and a handset separately.

"Microsoft's participation will further expand the CDMA industry's value chain, and will help increase China United Telecom's research and development ability in the market for CDMA services," the statement said.

China United Telecommunications is the parent of New York- and Hong Kong- listed China Unicom Ltd. . It claims to operate the world's largest CDMA- standard mobile network, whose eight million current subscriber base is forecast to reach 20 million by year end.