Qualcomm Inc (QCOM)

[Bored Observer]

The comparative data on the web is quite revealing when you stop to think of the reality behind the numbers:

CDG proudly reports on their website that the total CDMA subscriber base is now 318 million.

On the other end of the scale, GSM Association recently announced passing the 2 billion subscriber milestone.

The announced GSM/WCDMA growth rate is 1000 new subscribers PER MINUTE.

This means that IN LESS THAN A YEAR the GSM/WCDMA subscriber base will grow by THE SAME AMOUNT AS THE TOTAL EXISTING CDMA SUBSCRIBER BASE in the world.

So while the existing CDMA subscribers are pondering whether to buy a new CDMA handset during the next 7-8 months or so, the competing technology camp will FIRMLY SELL as many handsets for NEW subscribers as the total number of existing CDMA subscribers today.

Plus naturally all the renewal sales from their existing 2 billion user base, many of which are doing the transition to 3G.

Currently we have about 1:6 CDMA-to-GSM/WCDMA ratio. By the end of 2006 it will be 1:7.

So it is reasonable to estimate that 1:10 ratio will be reached sometime in 2008. Throw in a couple of defecting CDMA operators and it may happen already during 2007.

If you take US CDMA-to-World GSM/WCDMA ratio, we're down to 1:20 already TODAY.

Those of us with any exposure to electronics industry know what an order of magnitude difference in volume does to component pricing.

Why should ANYONE bother to put a lot of effort into that < 5% of the market, which is becoming less competitive every passing day?

Whether the CDMA license cost drops from 7% to 3% or even zero does not matter much in the long run. Order of magnitude is simply too big a gap to cross with single digit percentages.

There's a nice real time ticker on the GSMA website to look at while you wait for this to sink in...

http://www.gsmworld.com