BUSINESSWEEK ONLINE : MAY 22, 2000 ISSUE
INTERNATIONAL -- COVER STORY Let a Million WAP Users Bloom Intrinsic Technology is betting on wireless Net fever in China. When will the big China telecoms join in? WAP might seem like a cartoon word that describes the sound of Batman socking a villain, but it's fast becoming common usage in China. By many estimates, wireless application protocol, an international standard that converts Web pages to fit onto mobile phones, is the next big thing in China. "Sooner or later WAP is going to be part of everybody's everyday life -- everything is going wireless," says Jun Wu, CEO of Intrinsic Technology. The plump, slightly rumpled Shanghai native points to the double-digit growth in mobile-phone usage in China over the past few years as proof of the huge potential of the WAP market. Even conservative estimates put the number of WAP users in China at 1 million by the end of 2000, he says. Intrinsic, a wireless applications developer, hopes to be on the crest of that wave. It's cheaper to buy a WAP phone than a new PC, and the devices feed into the Chinese tech mania for having the "new new thing." The few WAP-enabled mobile-phone models now available retail for around $365, slightly more expensive than a run-of-the mill WAP-less phone. However, all new models will soon be WAP-enabled, says Intrinsic CFO Derek Sulger. Considering that China is expected to have 100 million to 150 million mobile-phone users by 2005, "down the road -- three to five years -- this is a big market," says Zhang Wankun, chief Shanghai representative for U.S.-based venture-capital outfit Newbridge Capital. BUT FOR NOW? That begs the question: What about today, now, this year? "I'll wait for the technology to develop a little," says Nick Zhang as he tries out non-WAP-phone models at a small Shanghai shop. And even when all mobile phones are WAP-enabled, consumers may be cautious about using the wireless applications. The access speed is slow, the charges are high, and the services available are still limited, says Yu Lijun as he inspects a Linktone menu on a cell phone for sale. Linktone is Intrinsic's tool for marketing its products. The WAP portal, which is also accessible through an ordinary Web site, already offers e-mail, an address book, a personal WAP homepage creator, local entertainment guide, transportation schedules, and a daily horoscope, among other services. The portal aims to attract other content providers, using its technology as a carrot. Developing wireless applications -- which can then be showcased on Linktone -- is one of Intrinsic's anticipated revenue streams. It also hopes to earn money from licensing technology it develops and charging the end user for some of the content, much the way Japanese wireless giant DoCoMo now does. MOSTLY CLUELESS. Although many of China's traditional Internet content providers (ICPs) have plans to develop WAP content, "[it] is a totally different animal than wireline Internet" and therefore requires special skills and knowledge that traditional ICPs lack, argues Victor Wang, founder and president of Silicon Valley-based GWcom, a WAP application provider serving the China market. Says Newbridge's Zhang: "Right now...99% of the companies don't know how to develop WAP software." The background of Intrinsic CEO Wu suggests that he's one of the few with the skills for developing wireless applications. He was the first employee hired by Sendit, a Stockholm-based pioneer in wireless data and technology that was later acquired by Microsoft. While at Sendit, Wu was the chief architect of a WAP precursor. He stayed on at Microsoft long enough to ensure a smooth transition, then left to return to Shanghai, where he founded Intrinsic in 1999. Wu admits Intrinsic had trouble finding employees and that he had to train engineers "from the ground up -- hardly anyone had ever heard of WAP." He now employs about 100 people, 80% of them in Shanghai and the rest in offices in Beijing, Guangzhou, New York, London, and Taipei, among other locations. GOOD CONNECTIONS. Intrinsic was initially supported by private funds and is now courting its second round of venture capital. Although Wu and Sulger are contractually prohibited from discussing potential investors, a look at their respective resumes suggests possible candidates. Besides Wu's ties to Microsoft, Sulger previously worked for Goldman Sachs for seven years. Intrinsic is also in discussions to cooperate with other WAP companies and "major telecommunications operators" in China, which means China Telecom and China Unicom, the only two Chinese telecoms of any significance. Sulger hints at major deals in the works and hopes to unveil them on May 17, the date set for a nationwide rollout of WAP services. Both China Telecom and Unicom declined to discuss any specific plans, though they confirmed that they are in negotiations with WAP application providers. China Telecom did reveal that some 20,000 users have accessed its WAP network in the North China city of Tianjin, one of the sites of an experimental WAP rollout last month. STATE BLESSING. The involvement of China's two largest telecoms suggests central government support for WAP development. And indeed the Information Industry Ministry is "quite aware of the potential revenue and has taken a positive approach to promoting WAP," notes Wu. Nonetheless, the confusion over whether investment in the Internet sector is allowed must give some interested parties pause for thought. There is some risk involved, Wu admits, but adds that Intrinsic, a Shanghai-based company (with a Bermuda-incorporated shell company) using locally manufactured equipment, may be favored as a sort of national champion. Although Intrinsic views itself as more of a telco than an Internet concern, like almost all Internet companies, it sees a listing -- preferably on Nasdaq -- in its future, "whenever [it] is right." As a builder of technology rather than a pure dot-com, gaining listing approval from the Chinese authorities should be "imminently easier" for Intrinsic than for some online companies, suggests Sulger. Meanwhile, Intrinsic is already looking beyond China and talking to telecom operators in "more mature markets. We want to move ahead very quickly into international space," says Wu. GLITCHES ASIDE. Intrinsic is taking DoCoMo's i-mode WAP phone as a model for offering WAP services to China, initially concentrating on the entertainment and messaging functions. For its part, GWcom is looking at wireless stock trading to be the "killer app," says President Wang. WAP transactions are currently less secure then online ones, but Wang brushes that aside, noting that "all of this technology is a trade-off between convenience and security." Wu, too, sees stock trading as a popular use for WAP down the line because "Chinese people love to gamble." But more secure technology already exists that allows people to use their mobile phones to trade stock, he points out, so a shift to using WAP is probably 6 to 10 months down the road. China's notoriously unreliable telecom networks are another thing standing in the way of widespread usage of mobile phones to conduct transactions. GWcom's solution involves software tricks like a time stamp on transactions to prevent double execution should a line be cut, Wang says. Intrinsic's Wu admits poor line quality is a problem in China but adds that service in some areas like Guangdong and Shenzhen is more reliable than elsewhere. Shanghai is working on improving its system, he says. Despite those drawbacks, most Chinese observers still see China's wireless Internet market potential as nothing less than fabulous. "Once the technology and handset are improved, and there is sufficient content, we will see explosive growth of wireless Internet," says Wang Chaoyong, president of Beijing-based China Equity Venture Capital. The question, it seems, is when, not if. By Alysha Webb _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Wireless in Cyberspace (int'l edition) INT'L COVER IMAGE: Wireless in Cyberspace TABLE: The Clash of the Wireless Titans Begins CHART: Across the Globe, Demand for Digital Cell Phones Is Soaring Japan's Cutting Edge (int'l edition) CHART: Japanese Internet, Cellular, and Wireless Net Users Goliath vs. Goliath (int'l edition) CHART: Western European Internet, Cellular, and Wireless Net Users Sprint's a Web Evangelist (int'l edition) CHART: Total Internet, Cellular, and Wireless Net Users in North America China Surfing (int'l edition) CHART: Asia-Pacific Internet, Cellular, and Wireless Net Users Commentary: Yes, It Really Is the Next Big Thing (int'l edition) ONLINE ORIGINAL: IBM's Mark Bregman: "The Immediacy of Data" Will Change How We Work ONLINE ORIGINAL: Let a Million WAP Users Bloom ONLINE ORIGINAL: Matsushita's Takashi Kawada: "All We Have Is a Little Time Advantage" BW E.BIZ: "Martin Cooper: A Wireless Prophet Who's Pushing 'Smart Antennas'" INTERACT E-Mail to Business Week Online

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