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Qualcomm to invest $200M in India's Reliance

Qualcomm earns royalty fees on every CDMA handset sold.
Qualcomm earns royalty fees on every CDMA handset sold.  

By CNN's Kristie Lu Stout and wire reports

NEW DELHI, India (CNN) -- Cell phone tech giant Qualcomm plans to invest $200 million in India's Reliance Communications, sowing more seeds of expansion in Asia.

Reliance plans to use Qualcomm's CDMA cell-phone technology to launch a cheap, limited-area wireless service via fixed lines called "limited mobility" in 2002.

Its alliance with Reliance gives San Diego-based Qualcomm a greater foothold in Asia.

The California company has already successfully evangelized its CDMA standard in China.

This week, China's No. 2 mobile carrier, China Unicom, launched a $2.9 billion CDMA network in the mainland. It says it has already attracted 500,000 subscribers.

Competitor to GSM standard

The GSM, or 'global system for mobile communications,' standard is China's predominant system, as it is in Europe and much of the rest of Asia.

But Qualcomm, which pioneered the technology, licenses CDMA and earns royalty fees on every handset sold. CDMA stands for 'code-division multiple access.'

CDMA cell-phone technology boasts more capacity and faster data transmission than GSM. So Unicom has spent millions on a network to market it to high-end users, particularly businesses.

A record investment

Qualcomm claims its investment is the largest ever by an overseas company in India's fixed-line business.

"To date, foreign telecom investors have been interested primarily in the cellular sector and the total investment in the basic services sector has been limited to eight billion rupees ($165 million) in the past seven years," Qualcomm stated, in a release.

The company did not disclose what percentage of Reliance Communications it is buying.

Other significant international investors in the Indian mobile sector include Singapore Telecom, France Telecom and U.S. telecom heavyweight AT&T.

Reliance Communications is its telecom wing of the Reliance group, India's largest conglomerate.

It has ambitions of becoming a telecom heavyweight in the world's second-most populous nation.

The Indian industrial giant is spending 250 billion rupees ($5.17 billion) to wire the country with a fiber-optic cable network for a range of telecom services.

Last July, Reliance won licenses to start fixed-line services in 16 telecom zones across India, covering over 90 percent of India's population of just over 1 billion people.

Limited mobility

It plans to use CDMA technology when it rolls out its fixed-line network across India later this year to offer its limited mobility service.

Limited mobility is a service offered by fixed-line operators where a fixed-line phone connection can be used like a cellular service within a set geographical area, using a mobile handset.

India's cellular industry currently uses GSM wireless technology.

India's mobile market grew 80.2 percent year-on-year in October 2001, according to the Cellular Operators' Association of India.

The country added 201,096 new mobile subscribers in October to reach a total of 5.01 million users.

Reuters contributed to this report.



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