Qualcomm calls off $200-M deal for 4% stake in Reliance Info

By SiliconIndia   |   Thursday, 28 August 2003, 07:00 Hrs
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The San Diego-based Qualcomm has just confirmed that it is not making a $200m strategic investment in Reliance Infocomm for a tiny 4% stake, according to a business daily in India.

KOLKATA: The $3-bn Qualcomm, the global pioneer of CDMA wireless technology, has communicated its specific decision on Reliance at a recent closed-door session with global analysts in US. Qualcomm president and COO, Irwin Jacobs, was present at this meeting.

Qualcomm, the daily said, has not cited any specific reasons for dropping the $200m equity infusion plan in Reliance Infocomm, but indicated it was “cutting back on its strategic investments globally”. Remember, Qualcomm and the Reliance group had inked an MoU in January ’02, indicating that Qualcomm would pump in $200m for a minority stake in Reliance Infocomm (then, Reliance Communications).

The daily when contacted, Christine Trimble, senior director (corporate public relations) at Qualcomm’s headquarters, told ET: “Qualcomm has no plans to invest in Reliance Infocomm at this point of time. The company is in general cutting back on its strategic investments, as we believe our efforts have paid off in terms of growing the CDMA market.”

A Reliance Infocomm spokesperson, when contacted, declined to comment on the issue. But top circles close to the developments indicated that the decision was taken mutually, wherein the Reliance group is learnt to have told the Qualcomm management that it did not require any offshore equity infusion in Reliance Infocomm.

Interestingly, Qualcomm executives have indicated that “the company believes some pockets like the ‘450-market’ may require sizeable investments from Qualcomm to stimulate CDMA growth”.

In Qualcomm parlance, the ‘450 market’ refers to the ‘China, Russia and east-European bloc’, where the 450 Mhz band has been allocated for CDMA-based WLL communications. Qualcomm circles also confirmed that “India does not figure in its ‘priority 450 market’ since the Department of Telecommunications (DoT) has been unable to find any takers (read: WLL licence holders) for the 450 Mhz spectrum band for operating WLL services.

Be that as it may, Qualcomm circles have indicated that the decision not to pick up a minority stake in Reliance Infocomm, the country’s biggest advocate of CDMA technology, was not an indication of its dwindling business interests in the Indian telecom scene.

On the contrary, Qualcomm is a direct beneficiary of all CDMA handset sales in India since it earns a hefty royalty for every CDMA handset sold by WLL operators in India — equivalent to nearly 5% of the wholesale price of each CDMA handset. Qualcomm earns royalty in its capacity as the CDMA technology licensor, and Reliance Infocomm is the prime driver of CDMA handset sales in India with over 3m WLL subscribers till date. (Source: ET)

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