Zacks_Analysts' Blog : Qualcomm to Divest Indian Venture - Analyst Blog

Qualcomm Inc. (QCOM), the leading chipset maker for mobile handsets worldwide, intends to dispose of its remaining 76% stake in Broadband Wireless Access (BWA) spectrum in India to the local operator Bharti Airtel for around $1.2 billion–$1.3 billion.

In July 2010, Qualcomm sold 24% stake of its Indian broadband venture to Indian telecom operators Global Holdings Corp. and Tulip Telecom Ltd. for a consideration of around $58 million.

In 2010, the Government of India concluded a spectrum auction for both 3G networks and broadband wireless access where Qualcomm paid $1.045 billion to obtain the operating license in four major service areas of New Delhi, Mumbai, Kerala and Haryana.

Qualcomm plans to divest its full stake after creating a next-generation (4G) LTE (Long-Term Evolution) network to roll out super-fast broadband wireless access services. LTE is the emerging mobile technology that offers extremely fast broadband access speed and high-end multimedia services.

The fast-growing broadband market is attracting billions of dollars for introducing LTE networks in India in the coming years. As of now, after China, India is the second largest mobile phone market with respect to subscriber count.

Despite 735 million wireless subscribers, the broadband penetration rate is a mere 2%. This makes India the investment hub for telecom operators and gear makers.

Qualcomm maintains a strong balance sheet with nearly $19.107 billion of net cash & marketable securities. The company continues to generate positive free cash on a sequential basis. We believe liquidity will further strengthen as the company has decided to sell its FLO TV 700MHz spectrum licenses to AT&T (T) for $1.925 billion.

We maintain our long-term Outperform recommendation on Qualcomm. Currently, Qualcommhas a Zacks #2 Rank, implying a short-term Buy rating on the stock.