Qualcomm Inc (QCOM)

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Qualcomm part of deal for cell service in Europe
By Kathryn Balint
UNION-TRIBUNE STAFF WRITER
December 29, 2005

http://www.signonsandiego.com/news/business/20051229-9999-1b29qcom.html

Vodafone Group, the world's largest wireless carrier, announced yesterday that it will partner with Samsung and San Diego-based Qualcomm to provide high-speed cellular service in Europe next year.

Vodafone will use cell phones made by Samsung, a South Korean cell-phone maker, which in turn will buy semiconductors from Qualcomm, the world's second-largest maker of chips for cell phones.

Financial details of the deal were not disclosed.

The partnership is an important step for Qualcomm in making inroads in the market for chips that power cell phones using a technology known as wideband code division multiple access, or WCDMA.

Qualcomm declined to comment on the deal.

The company made its mark in the wireless industry with its CDMA technology. Qualcomm supplies about 90 percent of the chips that run CDMA cell phones and collects royalties on the sale of phones using its technology.

About one in five cell phones in the world uses the CDMA technology. But virtually all of the rest of the world's cell phones eventually will migrate to WCDMA technology.

Qualcomm stands to collect royalties on the sales of WCDMA because it incorporates some of the company's patented technology.

But Qualcomm doesn't have a corner on the market for WCDMA chips as it does with CDMA chips. The company is competing to supply chips in the 80 percent of the wireless industry where, until recently, it hasn't done business.

Michael King, a San Diego-based analyst with the Gartner market research firm, said the partnership among the three companies will help Qualcomm gain a foothold in the WCDMA market for chips.

"It's certainly good news for both Samsung and Qualcomm," he said.

King said industry analysts have long expected Samsung and Qualcomm to team up on phones using WCDMA technology. Samsung is one of Qualcomm's largest customers for CDMA chips.

"They've been such good allies," King said. "Seeing that they've signed up to use Qualcomm's chips is not such a big surprise."

Last month, Qualcomm expanded its relationship with Samsung in a deal that allows the South Korean company to make cell-phone chips under the Qualcomm brand.

That deal is important to both companies. It allows Samsung to diversify by contracting out its chip-making services. For Qualcomm, the agreement will help the company meet rising demand for chips in cell phones.

Around the world, wireless carriers are upgrading their networks to accommodate video, games, music and other applications. Earlier this month, Cingular Wireless, the largest carrier in the United States, launched its new high-speed service in 16 markets, including San Diego.

Cingular's network uses the same technology that Vodafone plans to deploy. Vodafone has said it plans to launch its faster service next year.

Gartner predicts the upgrade to faster networks by wireless carriers will result in a surge of shipments of phones that run on the technology Vodafone will use, from 6.3 million next year to 102 million in 2009.



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Kathryn Balint: [phone]; [e-mail]