Qualcomm Ban Means ‘Major Competitive Consequences,’ Analysts Say
The competitiveness of Sprint Nextel and Verizon Wireless will be hurt by the need to develop workarounds if the ITC’s Qualcomm ban isn’t overturned, Stifel Nicolaus analyst Rebecca Arbogast told Communications Daily. Investors say substitute devices could be created in 2 quarters, but carriers say it could take 1-2 years, Arbogast said. The reality is “probably somewhere in the middle,” she said.
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It likely won’t come to that, said Avi Greengart, Current Analysis principal analyst-mobile devices. There will be “enormously upset customers” if the ban takes effect, he said. Greengart said he expects the issue to be resolved through a Broadcom-Qualcomm settlement or a stay from a different court or the White House. But Arbogast said a settlement is unlikely, given the longstanding turmoil between the companies. Qualcomm may not settle “on principle,” Jupiter Research analyst Neil Strother agreed. There’s a “pretty good chance” the company will get relief from the govt., he said. Qualcomm declined to comment, and Broadcom didn’t respond by our deadline.
Qualcomm customers most hurt by the ban include national carriers Sprint and Verizon, and manufacturers LG, Samsung and Motorola. That’s because their 3G technology depends on EV-DO chips that Qualcomm holds a monopoly on, Arbogast said. AT&T has more flexibility because its phones use W-CDMA chips that can be produced by alternative makers, she said. Still, the ban could prevent AT&T from getting new models out in time for the holidays, she said. T-Mobile hasn’t launched its 3G network and would be affected only if the problem drags out, Greengart said. “We're a little behind in terms of launching UMTS,” said T-Mobile Managing Dir.-Regulatory Affairs Kathleen Ham last week: “To do that, we need handsets. We're watching this case very closely” (CD June 6 p8).
The ban would sting all the more for AT&T rivals because the iPhone launches this month, Arbogast said. Rival carriers were depending on new 3G models to fight the 2G- based Apple phone. They can keep selling current 3G phone models, but “if you can’t keep up with new models, you can’t move forward,” she said. Greengart agreed: There will be “major competitive consequences” if the ban isn’t resolved.
Carriers affected spoke out against the ITC ban but were reluctant to disclose contingency plans. This could be an indication that the companies believe the issue will be resolved, Greengart said. The ITC ban is “bad for industry and wireless consumers,” said Verizon spokesman Nancy Stark. Verizon is seeking a stay from the federal govt., she said. But Stark said she couldn’t comment on what Verizon would do if the decision isn’t overturned. Sprint has been similarly vague. A spokesman said the company plans to advance the view that the ban isn’t in customers’ interest, but he declined to elaborate. He said the company wouldn’t comment on the prospect of workarounds until it sees how the situation plays out.
Manufacturers were even vaguer about their options. “This is a dispute between Broadcom and Qualcomm and we expect both companies to act in the best interests of their customers and the industry to resolve this matter as quickly as possible,” a Motorola statement said: “We already have been working to address this potential outcome to mitigate its impact on our business… We do not anticipate any supply problems for our CDMA EV-DO-enabled handsets during the 2nd quarter.” A Samsung spokesman said: “We are working actively with suppliers and customers to ensure uninterrupted supply of phones.” LG Electronics didn’t comment by out deadline.