Qualcomm has (finally) announced its Indian partners for the Broadband Wireless Access rollout in India: the company has sold 13% stake each to Global Holding Corporation (which owns the tower company GTL) and enterprise WiMax service provider Tulip Telecom. Both companies will invest Rs. 140 crore ($28.86 million) in the entity, while Qualcomm will itself put in $164.3 million for the 74% stake. The entity will have an enterprise value of $1.1 billion – $888 million in debt, and $222 million in equity. Qualcomm will itself invest $164.3 million for the 74 percent stake. The stake sale leaves Qualcomm with 74% in the entity, conforming to FDI regulations in India, but is subject to approvals from India’s Foreign Investment Promotion Board (FIPB).
Plans: First Demo, Then Bring Telcos On Board
Qualcomm will apply to the Indian government for an ISP license, and four companies will be set up in the four circles (Delhi, Mumbai, Haryana and Kerala) where Qualcomm has won one slot each of 20 MHz TDD spectrum.
But what’s really interesting is that Qualcomm intends to bring in more partners into this venture – the initial trials should be completed by the end of this year, allowing Qualcomm to demonstrate LTE interoperability working with 3G HSPA and EVDO. This first phase, which will be rolled out with Tulip and GTL, will be operator neutral.
Kanwalinder Singh, President (India & South Asia) said that in the second phase, the company will partner with one or more EVDO players to demo the technology, and then for a full commercial rollout in 2011. Parag Kar, Sr. Director, Government Affairs told MediaNama that the company might need access to more infrastructure as well, which where telecom operators will also come in. Qualcomm will not be the consumer facing brand; that will be determined by the telco partners, who will have stake in the entity.
This also explains why Qualcomm wants to register the company as an ISP and not opting for a Universal Access Service License (UASL), thus allowing telecom operators to hold more than 10% stake. But how much stake will Qualcomm sell to telco partners? Singh didn’t share, saying it depends on the partner. Qualcomm is in talks with all 3G operators for partnering, and Singh did not comment on how many partners they’re looking at.
Tulip Telecom’s Role
Deepinder Bedi, Executive Director at Tulip Telecom told MediaNama that they’re financing the investment in this venture mostly through internal accruals and debt, and that their debt-equity ratio will remain the same. Tulip will look to provide broadband services to its enterprise customers, but sees this, at present, as more of a financial investment. Tulip has operations all across the country, and especially in the circles where Qualcomm has spectrum. “What we could bring to the table is infrastructure that is ready, and could be leveraged effectively, and a way for us to play in the retail space. We don’t want to play directly as a retail operator, but as a partner. Things will be clearer that we move forward over the next few quarters,” Bedi added, saying that there are adequate funds available and the Special Purpose Vehicle Tulip Telecom has set up for this venture may not need to raise more funds.
On Devices, Demand and the importance of LTE
Speaking with MediaNama, Kar said that the core value add is not the LTE technology, but the fact the integration between 3G, EVDO and LTE, else, one would need different devices for 3G and LTE. Kar believes that the two challenges going forward are the small PC base in India (around 70 million), and the vehicle for carrying broadband – the connectivity.
The BWA auction addresses the connectivity issue, and he feels that for demand to pick up, one needs both the device and the network to be aligned to the needs of the consumer; you can’t take a laptop to a farmer, with its current form factor: one needs a different form factor, with icon based access to services, applications, and Indic languages. Kar believes that 3G and LTE will accelerate the demand for the smart phones in India, and the volumes will help bring prices down, eventually to the level of current 3G devices in India. The inflection point will be at Rs. 5000.
Kar expects LTE handsets to be launched by the middle of next year, but says a lot depends on the alignment with the telecom operators, which is crucial. LTE, he feels, will become all the more crucial, with the expectation of 3G saturation in urban India in around two years, by the end of 2012.