CHINA-QUALCOMM/ANTITRUST Qualcomm to pay $975 million to resolve China antitrust dispute

Record ID: 1373630

  • Title: CHINA-QUALCOMM/ANTITRUST Qualcomm to pay $975 million to resolve China antitrust dispute
  • Date: 10th February 2015
  • Summary: BEIJING, CHINA (FEBRUARY 10, 2015) (REUTERS) VARIOUS OF TRAFFIC IN BEIJING'S ZHONGGUAN DISTRICT EXTERIOR OF ZHONGGUANCUN TOWER RECEPTION OF CLOSED QUALCOMM OFFICE SIGN READING (English): "QUALCOMM" CORDS ON FLOOR EMPTY OFFICE FRONT HALLWAY SIGN SHOWING LIST OF VARIOUS MOBILE SERVICE PROVIDERS
  • Embargoed: 26th February 2015 13:11
  • Keywords:
  • Location: China
  • Country: China
  • Topics: General
  • Reuters ID: LVA9I6LUOUCVAFRHHI9IM7UOQ825
  • Aspect Ratio: 16:9
  • Story Text: PLEASE NOTE: THIS EDIT CONTAINS MATERIAL THAT WAS ORIGINALLY 4:3
    Qualcomm Inc has agreed to pay a fine of $975 million, the largest in China's corporate history, ending a 14-month government investigation into anti-competitive practices.
    The deal - the details of which were first reported by Reuters on Monday (February 9) - also requires Qualcomm to lower its royalty rates on patents used in China, likely helping local smartphone makers such as Xiaomi Technology Co Ltd [XTC.UL] and Huawei Technologies Co Ltd.
    Qualcomm said the agreement removes a major source of concern for its investors, sending shares of the San Diego-based chipmaker up 2.8 percent to $69 in after-hours trading.
    China's expanding high-speed 4G network is driving demand for smartphones with leading-edge technology, but Qualcomm's opportunities have been clouded by the antitrust probe, which has also contributed to problems in collecting royalty payments from device makers.
    Qualcomm said in a statement on Monday it would not contest the National Development and Reform Commission's (NDRC) finding that it violated an antitrust law.
    Asked whether the resolution in China could affect the outcome of ongoing antitrust probes into Qualcomm in Europe and the United States, Qualcomm President Derek Aberle said, "We fully respect their authority, but we don't believe it's likely that other agencies will necessarily meet similar conclusions."
    The U.S. firm cut its full-year earnings estimate, putting the cost of the fine at about 58 cents per share, but it raised the lower end of its revenue forecast slightly.
    Reuters visited a Qualcomm branch, in western Beijing but it appeared empty. It was not clear why the office was not open. The company logo was hanging over the reception desk and it was also listed in the office directory of the building where it was situated. A former employee outside the office said it had been closed "in recent days", without providing any further detail.
    Discussions in Beijing over one of the most contentious cases under China's 2008 anti-monopoly law had intensified in recent weeks, culminating in meetings between Qualcomm senior executives and the NDRC on Friday (February 6).
    The NDRC's anti-monopoly bureau, said the $975 million fine - equal to 8 percent of Qualcomm's 2013 sales in China - was less than the 10 percent of sales maximum allowed under Chinese law because Qualcomm fully cooperated with investigators.
    "According to the law, Qualcomm must pay the fine to the Chinese government within 15 days after we issue a formal notice," Lu Yanchun, the deputy head of the price supervision and antitrust bureau of the NDRC, told state-broadcaster CCTV.
    "Preventing monopoly can create a fairer market environment for all the global investors that are involved in China's market competition," Lu added.
    Under the terms of the agreement, Qualcomm will offer licenses to its current 3G and 4G essential Chinese patents, widely used by Chinese device makers, separately from other patents. For companies opting for the new agreement, which applies to phones sold for use in China, Qualcomm will calculate royalties based on 65 percent of the phone's selling price, instead of on the whole price.
    As a result of the fine, Qualcomm said it now expects full-year earnings per share of $3.56-$3.76 for fiscal 2015, compared with a prior forecast of $4.04-$4.34. It raised its fiscal 2015 revenue forecast to $26.3-$28 billion, slightly raising the lower end of its previous forecast of $26-$28 billion.
    Excluding the cost of the fine and other one-time items, Qualcomm forecast earnings of $4.85-$5.05 per share, raising the lower end of its previous forecast of $4.75-$5.05. On that basis, analysts had expected $4.96 per share, on average, according to Thomson Reuters I/B/E/S.
    Qualcomm is one of several overseas companies, including Microsoft Corp, to come under investigation in China for allegedly anti-competitive practises.
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