Of course no sooner that I wrote about Nortel's optimism about its prospects in Asia, two things happened: one, Q3 results started being dissected over the weekend (Mark Evans had a good piece about that), and then today (Monday), there was a lot of talk on the Street about the reorganization of China Unicom.

It turns out that China Unicom is considering abandoning its dual network (CDMA/GSM) strategy, selling its GSM network to China Telecom (a wireline carrier).  That transaction could then open the way for China Unicom to align itself with another wireline service provider (China Netcom).  So what's the upshot of all this?  Well, perhaps a short term increase in 2/2.5G spend with easing demand for a 3G ramp-up, as both wireline and wireless carriers will now have 2.5G wireless offerings to concentrate on the short term.

It is expected that the Chinese government will still issue three or four new 3G licenses before the end of 2005, but the initial pace of deployment will be slower than initially anticipated.  So what's the impact to Nortel?  As one of the primary CDMA suppliers in the China Unicom account (alongside Motorola and Lucent), Nortel will benefit in the long-term, as the Chinese operator will only have to focus on the evolution of its CDMA network.  But in the short to medium term, spending will be reduced, as there is a lot of unused capacity in China Unicom's current CDMA network.