China Unicom Lights CDMA Rally

Offering a bit of relief to warning-weary wireless investors, China Unicom (CHU) says SARS didn't hamper sales in May.

The wireless service provider offered a host of good news to suppliers of wireless equipment Thursday, notably including a 7% sequential rise in its code division multiple access, or CDMA, subscriber rolls. The unexpectedly sanguine remarks set off a rally in shares of Qualcomm (QCOM) and other CDMA suppliers, such as RF Micro Devices (RFMD).

Investors and analysts, having received discouraging reports about China's poor business health in back-to-back cautions from Motorola (MOT) and Nokia (NOK) earlier this month, were bracing for bad news from the wireless service providers. With the impact of SARS and a potential glut of handsets in the market, observers had been expecting flat growth reports from outfits like China Unicom.

But the news from China Unicom was solid across the board, if particularly so for CDMA, the fastest-growing wireless standard, whose rapid expansion has attracted hordes of investors. Qualcomm shares jumped 7% to $38.05 in late-morning trading, while CDMA component supplier RF Micro rose 4% to $6.52.

While 59 million of China Unicom subscribers use the competing global systems for mobile, or GSM, phones, growth in GSM phones was just 1.4%. By comparison, CDMA subscribers jumped to 9.2 million in May from 8.6 million in April.

China Unicom said Thursday that overall customer growth was 2.2% in May, taking its total subscriber count to 68.1 million from 67 million in the previous month.

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