Reaching out to the world

Qualcomm will celebrate its quarter century next year, and will have much to look back and be proud of. Not only did it develop and deploy CDMA wireless technology at a time when not many believed in the viability of the technology, it has gone on to become a US$70 billion plus market capitalised company, and one of the world’s most profitable. Reporting from San Diego, Comm. considers the strategies Qualcomm is employing in order to maintain the significant momentum it has garnered over the past 24 years, and considers the company’s roadmap for the future

Paul Jacobs says he sees significant scope for the telecom industry and Qualcomm to ebenfit from the uptake of mobile broadband, mobile computing, and healthcare

Qualcomm’s president and CEO, Paul Jacobs was just back from vacation at the beginning of October when he hosted a Q&A discussion at the company’s headquarters in San Diego in the lead up to CTIA Wireless IT & Entertainment 2009. He was relaxed yet alert, self-assured without arrogance. It is these same qualities that characterise today’s Qualcomm, a company that has fought a long battle from once being a perceived antagonist to the GSM hegemony that mainly European infrastructure vendors were spreading around the world.

As technology differences began to ebb away in favour of a common wireless future based on Wideband CDMA and its evolution, Qualcomm has been enjoying wider global recognition, not just as a chipmaker and the licenser of CDMA technology and its derivatives, but as a technology innovator involved in services as diverse as location based services, healthcare and mobile TV.

Looking forward, Jacobs says he sees significant scope for the telecom industry and Qualcomm to benefit from the uptake of mobile broadband, together with mobile computing and healthcare.

“The phone is going to become the remote control of your digital life,” asserted Jacobs. “It will result in the case of having the network with you all the time.”

Given Qualcomm’s strong balance sheet, with over US $15 billion in the bank, the company has the luxury of being at the pioneering edge of technology, investing in projects that may not have a positive effect on revenues for some years to come.

“40 per cent of Qualcomm’s projects won’t generate revenues for at least the next three years,” forecast Jacobs. He described smartphones as a great trend for Qualcomm, allowing the company to continue pushing a growing number of chipsets, particularly as high-end devices flow into emerging markets in ever greater numbers.

“Four or five years ago we recognised that we had to change the focus of our R&D to incorporate looking at developing markets and lower price points,” said

Jacobs. That shift in strategy has meant Qualcomm has become more active and visible in global markets such as Europe, Middle East and Africa, diversifying away from its heavy emphasis on America – North and South – as well as Asia Pacific.

The change makes sense given subscriber addition forecasts that the overwhelming majority of mobile net additions in the coming decade will be added in emerging markets, driven by countries such as Brazil, India, and China.

Jing Wang, Qualcomm’s executive VP of Asia Pacific, Middle East and Africa, is a firm believer in the strong growth potential of mobile markets in Africa with respect to connecting the unconnected and serving under serviced communities. He described as “tremendous” the scope of growth opportunities for mobile Internet on the continent, and believes should the enabling environment be fostered sufficiently from stakeholders including national regulators, network operators, and technology providers; this opportunity can be successfully tapped.

“By 2015 3G will be the leading broadband access technology in the world according to independent forecasts,” Jing said. “The scope for growth of mobile is simply incredible in

Africa. Overall penetration on the continent is just 6.2 per cent, with 50 per cent of the population between the ages of 0-18 years. 80 per cent of the population is unbanked, though 60 per cent of the unbanked population own a mobile.”

Jing Wang describes as “tremendous” the scope of growth opportunities for mobile Internet in Africa

Qualcomm background

Given Qualcomm’s new found voice in markets across the globe where it was not always as visible as it is today, it is important to consider how the company has evolved to this point, and what the bigger picture is for the strategies and products it is pushing. Qualcomm has five key divisions:

• Qualcomm CDMA Technologies (QCT ), which is the world’s largest provider of wireless chipset technology

• Qualcomm Technology Licensing (QTL ), which manages Qualcomm’s extensive intellectual property portfolio

• Qualcomm Wireless and Internet (QWI), which houses Qualcomm’s Internet services, its government technologies enterprise services, and Qualcomm Firethorn Holding, a wireless technology for mobile commerce

• Qualcomm Corporate Divisions (Corp), which includes Qualcomm’s corporate engineering services, Qualcomm MediaFlo Technologies, Qualcomm Mems

Technologies and Qualcomm Flarion Technologies

• Qualcomm Strategic Initiatives, which is where Qualcomm makes strategic investments in order to promote the adoption of advanced wireless products and services. Qualcomm T&V makes strategic investments in privately owned start-up ventures to promote advanced wireless. QTL accounts for around one-third of Qualcomm’s revenues, but up to two-thirds of the company’s profit. This is of significant given that as some network operators evolve away from CDMA 2000-based technologies, of which Qualcomm is the sole intellectual property owner, to WCDMA, HSPA and LTE, technologies in which the key patents and intellectual property is shared amongst a group of vendors, this may have an impact on QTL ’s revenues and profitability going forward.

“In our licensing business, all we support is industry growth,” commented Bill Davidson, senior VP of global marketing and investor relations at Qualcomm, as he supported QTL’s revenue and profitability generating potential going forward. “We don’t need to pick a winner.”

Bill Davidson, senior VP of global marketing and investor relations says Qualcomm simply supports market growth, and is thus not pressured into picking a technology winner 

MediaFlo

An area that Qualcomm does banks on becoming a winner in is its MediaFlo service, which is a big play for the company, and offers broadcast television content to mobile devices. Purpose built as an end-to-end mobile multimedia delivery platform, the MediaFlo system, which is a network that was deployed by Qualcomm, receives live broadcast feeds, transforms content into a mobile format, and securely broadcasts to an unlimited number of mobile users.

Qualcomm acquired spectrum in the 700MHz band in 2005, and partnered with content providers with the view to offering broadcast mobile TV services. In 2007 Flo TV , as it is known in the US, was launched by Verizon Wireless, and a year later by AT &T Wireless. Having acquired additional spectrum in 2008, Qualcomm’s coverage plan for 2009 is for the service to be present in 100 markets in the US, in the coverage area of 200 million inhabitants.

Qualcomm chairman and CEO Jacobs acknowledges that the idea would be to ultimately spin off Flo TV at some point in the future, as the manner in which Qualcomm developed the solution was more about the acquisition of valuable spectrum blocks in the US, followed by the development of a business model that could most effectively utilise it.

At this point in time Flo TV is a 100 per cent subsidiary of Qualcomm, and it acts as a wholesaler of sorts with Verizon and Sprint paying a fixed sum per subscriber. The operators themselves offer the service, which currently constitutes 20 TV channels, for around US$15 a month.

At the beginning of October Flo TV unveiled its Personal Television, a dedicated device that allows TV consumers to watch content on the go, and is the company’s first direct-to-consumer product. The service is set to be offered before yearend, and will continue to offer the reception of live and time-shifted content over the Flo TV dedicated multicast network with no buffering, downloading or waiting to view content.

“We have witnessed amongst Flo TV subscribers that talk time and TV time is about the same,” commented Neville Meijers, senior VP and general manager of Qualcomm’s Media Flo Technologies. “People are watching as much as 25 minutes of TV content a day, which adds up to about 900 minutes a month, and in some cases this is even more than their monthly talk time,” he added.

Currently nine mobile devices are available that support Flo TV , and Meijers said in 2010 he would like to see ‘hero’ devices come to market, the type that sell more than one million units. Qualcomm has been looking to export the Flo TV experience outside of the

US and has been actively acquiring requisite spectrum in markets in Europe and Asia Pacific. In Japan, for instance, Qualcomm is looking at acquiring a licence permitting it to roll out the service by the middle of next year.