Betting big on 4G service uptake, Bharti Airtel picked up a 49 per cent stake in Qualcomm?s 4G business in India last month. As of now, Bharti has paid Rs 9.23 billion for a limited stake in the US chipmaker?s India unit, which owns broadband wireless access (BWA) licences and spectrum in four telecom circles in the country. Bharti will buy the rest of the stake by end-2014, subject to the commercial launch of 4G services, and fulfilment of certain terms and conditions.
As per the agreement, Qualcomm will provide technical assistance to Bharti in the areas of network architecture and optimisation, infrastructure and device testing. Qualcomm will also continue to develop and support the long term evolution-time division duplex (LTE-TDD) ecosystem for Bharti.
To purchase the stake, Bharti had to buy Qualcomm?s Indian partners ? Global Holding Corporation Private Limited (GHC) and Tulip Telecom ? which held 13 per cent stake each in the company?s LTE-TDD venture. Reportedly, Tulip and GHC each received about $40 million in cash from Bharti. For the remaining 23 per cent stake, Bharti has issued fresh equity in Qualcomm?s Indian entities.
?We are delighted to partner with Qualcomm, which shares our commitment to the government?s agenda of ?Broadband for All?. This tie-up will leverage Bharti?s national telecom footprint and Qualcomm?s technological leadership in the LTE-TDD space. With a broadband-ready network across the country, Bharti is well-positioned to lead the next phase of the Indian telecom revolution,? stated Sunil Bharti Mittal, chairman and managing director, Bharti Airtel.
As for Qualcomm, Dr Paul E. Jacobs, chairman and chief executive officer, noted that the company had been looking to bring in a strong partner with the scale, experience and resources to deploy LTE-TDD networks. ?We are pleased to have Bharti?s participation and support in this effort. Also, GHC and Tulip have helped facilitate this transaction. Qualcomm remains dedicated to the continued progress and success of the BWA venture and wants to fulfil its commitment as a key equity stakeholder,? said Jacobs.
In 2010, Qualcomm paid Rs 49.13 billion to acquire BWA spectrum in the Mumbai, Delhi, Haryana and Kerala circles. However, due to procedural delays, it received the spectrum only in April 2012. Soon after, it decided to dilute its stake. The two main contenders for the stake were Bharti Airtel and Aircel; the former eventually emerged the winner. Qualcomm is reportedly likely to exit the 4G venture through share dilution over time.
The deal is being viewed by industry observers as a win-win situation for both Qualcomm and Bharti. Being the first company to launch 4G BWA services in the country, Bharti intends to leverage this advantage to the fullest and get a headstart over its rival, Reliance Infotel, the only company to own pan-Indian BWA licences. Also, the acquisition will help the operator achieve its goal of a countrywide BWA service roll-out. It has already won licences in Kolkata, Karnataka, Punjab and Maharashtra, and the deal with Qualcomm will give it access to four more circles, including the lucrative Delhi and Mumbai circles. Moreover, Bharti will benefit from Qualcomm?s technological expertise in integrating and rolling out 3G and 4G services.
For Qualcomm too, this seems to be a promising deal. Given Bharti?s extensive reach across the country, the partnership will ensure successful uptake of LTE-TDD technology, which Qualcomm is actively promoting and investing in.
?With India at the forefront of the emerging global telecom market segment, Qualcomm will further strengthen its technology pitch in other emerging markets that are planning 4G roll-outs in the near future,? says Benoy C.S., director, ICT Practice, Frost & Sullivan, South Asia and the Middle East.
In all, the deal will fuel interest in the BWA space. Having launched these services in Kolkata and Bengaluru, Bharti seems to have set the pace for 4G roll-outs by its rivals.
