RealTime IT News

QUALCOMM Pumps $266M into CDMA Supporter

It's been said we are in a deep drought in terms of investment dollars for anyone, but nobody told San Diego, Calif.'s QUALCOMM Inc. that. The next-generation wireless purveyor Wednesday vowed to dole out $266 million of equity financing to Vesper, a Brazilian CDMA wireless service provider.

Incidentally, QUALCOMM's pledge comes at the same time VeloCom Inc., a privately-held Denver, Colo. business, infused $80 million into Vesper as part of a re-capitalization of Vesper's balance sheet. More broadly, Vesper is in the midst of a total restructuring.

QUALCOMM, which will become Vesper's largest shareholder, will position its financing for Vesper through the creation of a holding company. This holding company will be capitalized with 65 percent equity and 35 percent debt on a consolidated basis. Of the debt, $100 million will be held at the operating company level, with another $100 million held at the holding company. Remaining operating company and holding company debt has been extended through 2005, providing the holding company and Vesper with significant operational flexibility to support Vesper's growing business.

When Vesper completes its overhaul, it hopes to bring Vesper Portable to the market, which, when matched with value-based pricing, could pave the way for a new competitive carrier model in Brazil. Further details on this offering are not yet available.

Vesper's new management team is led by Luiz Kaufmann, chief executive officer. Kaufmann also led the restructuring of Aracruz, the Brazilian pulp manufacturer.

In a public statement, Kaufmann talked of the need to pair Vesper's new product portfolio with new services to cut costs and gain market share.

"These factors, combined with our flexibility to quickly and inexpensively upgrade our network to CDMA2000 1X next year and CDMA2000 1xEV-DO in 2003, give us a new range of voice and data products that will be unparalleled in the Brazilian market."

Dr. Irwin Mark Jacobs, chairman and CEO of QUALCOMM, said part of Vesper's attractiveness is that it boasts about 120 million points-of-presence, which span 70 percent of Brazil.

"After this investment, Vesper's enterprise value will be less than $5 per pop for the 1900 MHz spectrum and a fully installed CDMA network capable of supporting more than two million subscribers," Jacobs said in a public statement. "These economics give us confidence that Vesper is well positioned to take advantage of the convergence of wireless voice and data services."

QUALCOMM is a proprietor of CDMA-based solutions, which are the basis for cell phone networks in the U.S. while GSM is the route much of Europe has taken.

QUALCOMM and carriers such as the Vespers, Sprint and Cingular are all gearing up for 2.5G and 3G rollouts. Indeed, Yankee Group said it believes global capital expenditure (capex) for wireless mobile network infrastructure will increase from $99.4 billion in 2001 to a maximum of $120.2 billion in 2004.

"There has been a great deal of speculation surrounding the cost of 2.5G and 3G network implementations. It is evident that it is going to be expensive, particularly for operators that are transitioning between generic technologies," said Phil Marshall, an analyst at the Yankee Group. "However, with the imminent obsolescence of 2G technologies and the promise of next-generation services, operators cannot avoid these costs without the risk of losing market share."

Marshall concluded that expenditure cannot come soon enough for the infrastructure vendors that are relying on the 2.5G and 3G technologies that they have aggressively promoted.