Irwin Mark Jacobs, CEO, Qualcomm: He built an industry from scratch

Last fortnight, chairman and CEO of Qualcomm Irwin Mark Jacobs and his son and President (Global Development), Jeff Jacobs, came visiting Delhi. What could have prompted the Jacobs to brave the capital's notorious fog and press flesh with customers and the media? Simple. India promises to be the single-biggest market for Qualcomm's CDMA (code division multiple access) telecommunications technology. Already, CDMA's two major customers in the country, Reliance Infocomm and Tata Teleservices, have racked up 9 million subscribers in less than a year. By end 2004, they could double the number to 20 million. For comparison's sake, consider that Qualcomm has just 100 million end users worldwide. So, in a way, India is also the country that will establish beyond doubt the credentials of CDMA technology, which was shrugged off when Qualcomm first introduced it in 1995.

Till two years ago, the San Diego-based start-up had an uphill task. In Europe, for instance, it was up against a TDMA (time division multiple access)-based technology called GSM (Global System for Mobile). But today CDMA-it divides information into packets, each of which travels through the least path of resistance in the network and gets reassembled at the other end-is seen as the better standard for 3G services.

Unlike the GSM standard, which is owned by no one company, Qualcomm owns all the patents for the CDMA standards (CEO Jacobs alone holds some 2,461). So every additional cellphone sold that supports this standard adds to Qualcomm's kitty. Qualcomm designs chip sets and gets them manufactured in Asia. These chip sets are used by other phone manufacturers. It also makes money if any manufacturer makes his own CDMA chip set, because he has to pay the company a royalty since it holds all the CDMA patents. No wonder, the company's stock, at $59, enjoys a price-earning multiple of 40.

Since Qualcomm does not have any competitor, its growth depends simply on how quickly it can ensure a CDMA network rollout. It also has to convince existing cellular operators to move into next gen 3-G services where the cellphone is used for other applications like video, besides voice. It succeeded in Korea, where the country's much talked about state-of-the-art wireless broadband network is a CDMA network. But that country itself is too small to deliver on the promise that Qualcomm has made to its investors. That is where India and China come in. India is hotter because China has a GSM network in place, while in India the CDMA market is growing at a sizzling pace.

If this is going to be the biggest and the fastest growing market, the operators here will need technology support to differentiate their services. The CDMA phones do not have a SIM (the identification card used in GSM cellphones) card. So the operator may have to provide a service that can be activated through the internet. That will require (cheap) support and not surprisingly Qualcomm is looking at setting up a development centre here. That apart, Qualcomm has come up with a development environment called brew. Using brew a software company can launch an application that will work on any CDMA network in the world. To run the application, there have to be brew-enable phones. That means having brew developers.

So, Jacobs has to make sure that brew is as common a word in India as Java. Now we are not even talking about the need to influence telecom policy here. Qualcomm is talking about roaming between CDMA and GSM networks. Well, all we can say is it won't be a surprise if the Jacobs move home here.

-Vidya Viswanathan

To Beat A Telgi
How about a stamp paper dispenser?

Niranjan Bardalai, CGM, State Bank of Mysore: A hi-tech solution to a low-tech scam

On 22 December 2003, the state bank of Mysore's General Manager B. N. Ramiah made a presentation to D.C. Gupta, Finance Secretary, Ministry of Finance about an innovative solution to the fake stamp paper problem: an automated stamp paper dispenser. Control supply, and you control what goes into the market. In this case, only the genuine stamp paper. Developed by the bank in collaboration with Tata Infotech, the automated dispenser, nicknamed Kubera, will accept cash in return for stamp paper of appropriate value. A printer prints out stamp paper on a special paper (like that of cheques). Each stamp paper has a unique number, besides "batch" details, making it possible to trace its origin. For starters, the bank plans to install a hundred such Kuberas across Karnataka. "The mythical Kubera was the treasurer of Gods and the automated stamp duty collection machine will be the new Kubera of the government," says Niranjan Bardalai, the bank's Chief General Manager.

Doing so won't be easy. Each Kubera costs Rs 9 lakh, and to create a foolproof network, the dispensers will have to be installed all over India. Besides, at least in Karnataka, the bank wants to be the sole vendor of the technology. For the innovation to work, a consortium of banks will have to create an ATM-like network, which won't just take time, but a lot of money too. Some governmental sops, then, should do the trick.

-Venkatesha Babu

The New & Improved SEBI
Stockmarket cop G.N. Bajpai intensifies his vigil.

SEBI's G.N. Bajpai: He means business

Being a stockmarket regulator is never an easy job. And in these times, when a runaway Sensex is quickening the pulse of many, it can be harder still. No wonder, then, Ghyanendra Nath Bajpai, the 61-year-old Chairman of the Securities and Exchange Board of India (sebi) has been on an overdrive plugging potential holes. Last month, he got the sebi board to approve an integrated surveillance system, which aims to capture data across all of India's 23 stock exchanges. The idea: keep an eye out for market manipulation. That apart, Bajpai has not lost an opportunity to caution investors and warn market operators about shenanigans. If that means cracking the whip on a hi-profile fund manager like Samir Arora (formerly of Allianz), so be it. As for small investors, SEBI has organised 250 workshops in more than 140 towns in the last one year alone.

But then Bajpai came to SEBI-from LIC, where he was the Chairman-like a man on a mission. He introduced T+2 settlement cycle across all scrips (which means payment and paper work is completed in two trading days after a trade is executed, thereby, reducing the risk to the market and investors), unearthed dabba trading and exiled its mastermind P.K. Bansal from the stockmarket, and has thus far issued 750 directives, including the banning of scamster Ketan Parekh from trading for the next 14 years. More importantly, Bajpai has revamped the way SEBI works. Its board now has two full-time executive directors, in addition to the Chairman, who have powers to adjudicate. This has speeded up decision-making at SEBI, and freed up Bajpai to focus on larger issues.

SEBI's top cop isn't resting on his oars, though. He wants to improve the agency's software (read management skills) and hardware. He also plans to introduce new products in securities, as well as interest derivatives, upgrade skills of market intermediaries and introduce a straight-through processing system that will enable DEMAT-to-DEMAT transfer of shares, eliminating the physical component in the trading that currently exists. And once the real-time gross settlement system falls into place, SEBI plans to bring in a T+1 settlement cycle. Bajpai's big plan, however, is to make the Indian stockmarket a global benchmark. No doubt a tall order, but one worth aspiring for.

-Roshni Jayakar

David And Goliath
The Reliance-Nocil deal raises a bigger issue: of market monopoly.

Less than two years after it snapped up IPCL, early this month, Reliance Industries acquired two divisions of Nocil, an ailing Arvind Mafatlal group company. Already a dominant player in the petrochemicals and plastics markets, the latest deal consolidates Reliance's near-monopoly position.

In petrochemicals and plastics, Reliance enjoys market-shares that range from as high as 45 per cent to a vice-like 100 per cent. With Nocil's capacities in the bag, Reliance's estimated share of domestic ethylene capacity is 70 per cent, polypropylene nearly 90 per cent and MEG, a fibre intermediate, 80 per cent. Besides, Reliance is the sole producer of low-density polyethylene (LDPE) and paraxylene.

Is that fair? Well, that depends on how you view it. With an overwhelming clout in the petrochemicals and plastics market, is Reliance able to indirectly or directly determine sale and purchase prices of its products? With dominant marketshares for almost all of its products-as much as 100 per cent in some cases-it may be easy for it to do so. Reliance's own argument runs differently. Post-liberalisation, nearly all of its products are freely importable so, at least in theory, it doesn't control these markets. Plus, it can be argued, that in a de-regulated market, again in theory, no one is barred from entering these markets with fresh capacity.

But there's a catch in both the arguments. First, the already established scale and size of operations of Reliance's highly integrated petrochemicals businesses is in itself a formidable entry barrier. Few newcomers would be brave enough to take it on. Second, although import tariffs have been declining, Reliance's mega-scale and integration-it produces most of its raw material-gives it cost advantages and, ergo, the ability to price its products competitively.

The larger issue is that India lacks effective anti-trust legislations. Unlike in the EC or the US, where stringent competition laws blocked recent deals like General Electric's bid for Honeywell Corp., or the Sprint-MCI Worldcom merger, India's Competition Bill, 2001, is yet to get the nod and is actually being re-drafted after protests, mainly from industry.

Free markets need safeguards and as the Indian economy opens up, there is an increased need for effective anti-trust laws to ensure trade is fair in all markets. Today it may be the petrochemicals market; tomorrow it could be telecom.