INTERVIEW:Qualcomm Japan 'For Real' In 3G License Bid
By IAN MESSER
TOKYO -- The president of Qualcomm Inc.'s (QCOM) Japanese operations said the company is serious about pursuing an operating license for third-generation (3G) cellphone services, depending on which of the two competing formats for 3G technology Japan's DDI Corp. (J.DDD) chooses.
"We cannot live with a situation monopolized by the wrong technology," Ted Matsumoto said in an interview with Dow Jones Newswires, explaining the U.S. telecommunications giant's surprise decision to launch a last-minute application for a 3G license in Japan.
Matsumoto confirmed that Qualcomm would decide whether to go ahead with the application to Japan's Ministry of Posts and Telecommunications if DDI, one of Japan's three major cellphone service operators, chooses to adopt the W-CDMA (wideband code division multiple access) technological standard rather than the CDMA2000 format supported by Qualcomm.
Such a move by DDI, which would represent a major reverse, would mean that the company is falling in line with Japan's two other big cellphone operators, NTT DoCoMo Inc. (J.NTX or 9437) and Japan Telecom Co. (J.JTC or 9434), which have already said that they will adopt the W-CDMA standard.
Matsumoto called the odds of DDI's choosing W-CDMA "50-50".
Such a choice would be bad news for Qualcomm, he said. Although Qualcomm generates the same royalty rates from both W-CDMA and CDMA2000 technology, he noted that a shutout of CDMA2000 technology would hurt Qualcomm's sales of semiconductor chip sets for mobile handsets in Japan.
Matsumoto said he was "very surprised" by DDI's possible change of heart, and that DDI's prevarication left Qualcomm no other choice but to apply for a license itself.
Qualcomm would most likely drop its license bid and come to an "amicable settlement" with DDI if DDI were to choose the CDMA2000 format Qualcomm favors, Matsumoto said.
However, he stressed that Qualcomm's plans for making its own application are "for real," and said he and his staff are currently working around-the-clock to prepare an application by the May 12 deadline.
Matsumoto said that if Qualcomm goes ahead with its application, he is "reasonably confident" of winning a license. Unlike other countries where licenses to operate 3G cellphone licenses are offered through an auction process, in Japan it's a "beauty contest," noted Matsumoto.
Qualcomm's CDMA2000 format is "clearly superior" for wireless Internet applications, Matsumoto said. "Our technology can utilize the 3G spectrum much more efficiently for Internet users," he said.
Matsumoto conceded Qualcomm's application would be handicapped by the fact that it isn't a cellphone service operator, unlike the three other declared applicants. However, he sees the strength of CDMA2000 technology as a telling advantage.
Outlining Qualcomm's strategy for its license application, Matsumoto said that Qualcomm's bid would be made through a new company rather than through its existing operations in Japan.
The new company would be backed by a "purely U.S. consortium," he said, adding that Japanese partners would only be invited after a license has been obtained.
Matsumoto said that he has already been in touch with several potential local partners, but declined to name the parties involved.
The Qualcomm-led consortium would initially build between 9,000 and 10,000 base stations to support a 3G cellphone service in Japan.
The plan would require investment of roughly $10 billion, Matsumoto estimates. Financing would not be a problem, as "the money is available," Matsumoto said. Qualcomm estimates that the new venture would have "a positive cashflow in 3-4 years," he said.
At stake is a huge potential market, as the introduction of commercial 3G services is expected to be the next landmark event in the development of the global telecommunications industry.
The wider bandwidth available with 3G technology can support video conferencing and high-speed Internet access through cellphone handsets.
Japan recently became the third country in the world where cellphone subscribers outnumber fixed-line users.
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