Qualcomm to Boost CDMA With $200 Mln Reliance
Stake (Update2)
By Abhay Singh
New Delhi, Jan. 10 (Bloomberg) -- Qualcomm Inc. will invest $200 million to
buy an undisclosed minority stake in India's Reliance Communications Ltd. as
the San Diego-based company seeks to promote its technology.
Reliance plans to use Qualcomm's Code Division Multiple Access, or CDMA,
technology, which is used in about 100 million mobile phones, to offer services
in the country from June. The companies made the announcement in a joint
statement today.
Reliance Communications Ltd. is a unit of Reliance Industries Ltd., India's
largest non-state company, which has interests ranging from petroleum
products to textiles.
The company expects to sign up as many as 35 million users for its mobile
services in three years, according to an earlier press release issued by Korea
Telecom Freetel Corp., South Korea's second-largest mobile phone company,
which won a $10 million, three-year contract from Reliance to design the
network.
The move gives Qualcomm, which earns royalty on every CDMA handset sold,
a toehold in India, a new market for it in Asia after China. China United
Telecommunications Corp., the country's second-largest mobile operator,
unveiled a $2.9 billion CDMA network this month and has signed up 500,000
people attracted by its promise of clearer calls.
Freetel Stake
Qualcomm has previously invested in companies that promote its technology,
such as KT Freetel, of which it owns 1.4 percent. Indian newspapers such as
the Hindustan Times and The Hindu Business Line had earlier reported that
Qualcomm may buy a 3 percent stake in the Reliance Industries unit.
The investment ``is not out of character with what Qualcomm has done
elsewhere in the world,'' said Wachovia Securities Inc. analyst Mark Roberts,
who rates Qualcomm a ``strong buy.''
``India has a very diverse population and very low teledensity,'' Roberts said.
``CDMA is an ideal technology to deliver basic telephone services and is also
very spectrally efficient.''
The advantage in using CDMA lies in a quirk of Indian phone licensing rules
that award free radio frequencies to fixed-line phone operators, such as
Reliance, allowing them to offer mobile phone services in an area where local
calls apply, such as the capital city of New Delhi or the financial hub of
Mumbai.
This is meant to make it easier for operators to build phone networks and help
raise the number of phones per 100 people, or teledensity, to the government's
target of seven by 2005 from about three at present.
`Limited Mobility'
These ``limited mobility'' calls are charged at fixed-phone rates of 1.20 rupees
($0.02) for three minutes, or roughly a third of what calls cost on the more
prevalent Global System for Mobile communications, or GSM, standard in
India. Also, while incoming calls are free on CDMA phones, they are charged
on GSM services.
Reliance expects to have 5.1 million users by the end of this year, the KT
Freetel statement said. That compares with a total 5.4 million mobile users in
the country at present that use GSM technology. These are expected to reach
31 million by 2005, according to researcher Gartner Group. Reliance declined
to comment on the estimates.
The move by the government to allow these services in January last year
prompted GSM mobile operators to appeal against it in a special court for
telecommunications disputes. A final ruling is expected by February.
Still, Reliance, whose telecom business at present is limited to cellular phone
services using GSM technology in six provinces besides the northeastern
Indian states with a total 334,319 subscribers as of December last year, is
pushing ahead with its plans after it outlined its ambition of re-entering the
business on a larger scale in June 2000.
Faster Data
The company acquired 17 new fixed-line phone licenses last year that cover
95 percent of India's population of a billion people. It plans to deploy an
advanced variant of CDMA called CDMA2000 1X that will allow users to
access information on their mobile phones at speeds 32 times faster than
what GSM allows at present.
``For the first time, Indian consumers will have the choice of wide-screen,
color-display, feature-rich handsets at attractive prices,'' Mukesh Ambani, vice
chairman at Reliance Industries, said in the statement.
Separately, Reliance is building a 60,000-kilometer (37,290- mile) fiber optic
cable network for voice, data and Internet traffic at a cost of $5.3 billion that
will link 115 Indian cities. It had finished 18,000 kilometers by the end of June
last year.
The network will act as the backbone for the group's domestic and overseas
long-distance and cellular phone services. Reliance is also one of the three
bidders for the 25 percent stake the government is selling in monopoly
overseas phone operator Videsh Sanchar Nigam Ltd.
Reliance expects its combined telecommunications businesses to garner part
of the country's market for voice and data services, which it has said will be
worth $20 billion in five years from $8 billion at present. |
