'We want to help Reliance build a CDMA Network in India'

Why did Qualcomm invest in Reliance Communications? 

One of the visions that we had in India was to get a nationwide CDMA network built. While there where many good operators promoting CDMA, but all were strong regional players. We were interested in engaging a nationwide player with a network. Reliance shared the same vision and so we ended up signing an agreement with Reliance Communications Limited which is not only going to deploy CDMA network but also NLD and ILD network when licenses are issued. 

What is the equity that you have taken in Reliance Communications? Can you provide details of your arrangement with with Reliance Communications? 

We are not publicly disclosing that at this point. We plan to invest US $200 million for a non-controlling minority stake in Reliance Communications. We do not have board seat and no voting rights. So, it is a passive investment. In the case of Reliance, we actually have been engaged with them for sometime and worked very closely with them educating them on CDMA. We worked closely with them on their RFP that they send out to the manufacturers, their rollout plans, and marketing plans. We have been introducing them to the key manufacturers of infrastructure and handsets and help and work with them to define really what they need to be successful on the handset or on the infrastructure side, essentially getting them educated about 1X capabilities. We have a technical services agreement with them to help them ultimately deploy the infrastructure, test the infrastructure, and optimize their network.

How is your investment in Reliance different from the investment in Brazil for Vesper? 

It is fairly similar investment although in Vesper in Brazil we have board representation today, and we do have management control and we certainly have management in place and we have a controlling interest and so I would say it is much more hands on in Brazil versus here in India. 

Did you also enter into handset manufacturing arrangement with Reliance?

Reliance is currently in the decision making process about manufacturing handsets. There are lot of factors which goes into making that decision and we will certainly support them if they did that by licensing our technology to them and also help them if they need designs for phones. On the other hand they are also actively talking to many handset manufacturers around the world about what the current and future feature set of the phones are and its price structure. They are currently trying to weigh the pros and cons of whether they should manufacture inside India or import them. 

Do you plan to invest more in Reliance as the project progresses or any other company in future? 

The investment in Reliance is a beginning for Qualcomm in India. However in terms of the size, the typical investment that we have made in carriers around the world varies from US $100 million to US $200 million. So, our current plans are not to invest any more money into Reliance Communications. 

We would be interested in investing in a wireless operator if we are interested in forming an R&D center in India than that type of potential investment can happen. But in terms of investing in a wireless operator investing all cash this will be the one investment that we can see for the foreseeable future. 

Do you plan to set up R&D center in India?

We are certainly considering putting up R&D center in India. One of the exciting things about CDMA 2000 is that it builds a wireless Internet platform because you get throughput rates of 1X of 144 Kbps and 307 Kbps and with 1X EV-DO of 2.4 Mbps. And that builds an interesting wireless Internet platform and the world would be interested in developing applications perhaps of those networks which can utilize given the strength of the Indian software industry and the application development community will make a lot of sense for us to consider putting together kind of applications that are in India but still under considerations. 



How do you look at India and China with respect to CDMA? 

China Unicom has build out capacity for 15 million network which is a fully commercial commercial network. They are initially limiting the users to around 500,000 to see that the network is performing as it should and to get the necessary market feedback. They are not only going to build 15 million today but they have announced that they are going to add 20 million more capacity by the end of this year and the majority of that being 3G and then in the following year they are going to add another additional 15 million capacity . So end of 2003, in China there would be 50 million capacity with a majority of that being CDMA 2000 or CDMA 2000 1X. In terms of the Chinese market, Indian market is however less matured. The population of China is 1.3 billion and on the wireless front the penetration is 10 percent penetration. So, we have 130 million wireless user in China and they add somewhere between 2-3 million new users every month. So if we compare the mobile population in India which is 5 million GSM users which China keeps on adding in just under two months. So, it is just that they are on a different growth curve right now. A little more mature market will actually expect the take up to go up very quickly in China because of this but for the Indian market there may be further lack on the growth curve but it provides obviously huge potential and you don't already have 130 million users already using wireless but what you have is 5 million GSM users and a million CDMA. So, the potential is to get after 300 million or so people that we believe today can afford a wireless phone in India and all the time tariff structure continue to come down and phone prices continue to come down to get the majority of the Indian population and the potential is just tremendous. 

Do you have any plan foray into Europe, a predominantly GSM market?

In Europe, it is an interesting case as 900 MHz band have been blocked by regulatory bodies for GSM so you cannnot use CDMA in those bands. For the third generation, the spectrum that has been set aside for the operators is in the 2.1 GHz band and only technology that one can use in this band is an ITU approved technology which is a form of CDMA. So, in future, Europe is also going to go to CDMA. In the meantime, however, we actually have been pursuing a strategy at the 450 MHz band and the first country that we actually have a network operating in is in Romania where carriers have deployed a nationwide network. In the 450 MHz the propagation is so good that to get in building coverage and to get wide scale coverage of raw areas you do not need many base stations so the cost to build the network is very low. We are continuing to look at other places throughout Europe to purchase 450 MHz spectrum. Russia has just approved CDMA as the official standard in the 450 MHz and couple of operators there would soon be deploying CDMA infrastructure. In Indonesia, there has been a lot of interest and also in the Middle East there has been a fair amount of interest. On the African side, we have so much to do. Africa has not been at the top of our priority list. We have been much more focussed on the China, India, Mexico and Brazil. Having said that there is clearly a very large built up opportunity in Africa and some point in next year we will start expanding our focus to Africa. 

Is WCDMA the only way to enter the European market and are you looking at 2003 or 2004 for entering the European market? 

We will continue to talk to operators who have run out of capacity on their GSM networks about how to use CDMA and with the current spectrum and thus increase the voice capacity or convince them that they really not need to wait until 2004 to put WCDMA when they can put CDMA 2000 today. With that the current trend of the operators is to deploy CDMA. And I expect the large scale deployment of CDMA is going to happen through WCDMA and that is going to happen in 2004. timeframe. 

Out of the wireless technologies --CDMA and GSM. Which is the best technology? 

GSM has five or six year headstart than CDMA. There is currently about 500 million users of GSM and there is a 100 million plus user of CDMA. GSM growth is significantly flat and there is not much growth except in Europe and they are going after places like India and China, where we have made inroads. So currently CDMA is the fastest growing wireless technology whereas GSM is flat now. The GSM operators in future are going to migrate to WCDMA. So, it is only time before CDMA becomes the most dominant technology on the wireless front. 

When will CDMA overtake GSM? 

It is fairly difficult to predict because you do not know when W CDMA is going to make to the market or take a break. So, I think over time it is still going to be very significant amount of GSM which will not grow any more. I think you would start to see CDMA become at par or greater than GSM in 4-5 years time frame. 

What are your India plans? 

I will certainly expect Qualcomm to continue to expand the India office as the opportunity is great today but ultimately the opportunity gets realized it will certainly need greater staffing. We believe the software industry in India is very strong and so we will utilize that industry to take advantage of the platform that CDMA will ultimately provide. I certainly expect that our staff in India will grow and our investment in India will also grow. 

Do you plan to fund India-based companies and what are the probable areas that you are looking at? 

The qualcomm venture fund is a US $500 million focussing on wireless Internet space which is targeted to be invested around the world. We have set up separate funds in Korea and Japan to focus on those markets. Given the capabilities in India and the opportunities that the Indian market is going to provide plus the ability to export this technology around the world. It is quiet likely that we will get very active in the Indian venture market in terms of looking at investment. We have not made any investment in any Indian start up companies. We did not had lot of effort in the past but I will expect this part of whole effort of Qualcomm expanding its presence in India. 

What can a consumer expect on the CDMA handset?

I think today most of the phones are very focussed around smaller, cheaper, lighter, very voice-focussed. In the more matured market you are going to see instead of that ramp coming down and the start the ramp coming up by providing more featured phones with more capabilities with colored screen with cameras added on, handsets with more memories, more processing capability with handsets having much more computer like and than you are going to add in integrated features to those phones which will have wireless LAN capability, bluetooth capability built on to those and obviously Internet access built in. We have position location technologies. So, we are going to have very powerful computer in your hand which is very in expensive and that is attached to the Internet and that has many more future.