Wednesday, September 13, 2006

Calls of Note Part 3

- JP Morgan comments on Qualcomm (NASDAQ:QCOM) noting India reported August wireless sub numbers, finalized this week, with net additions rising for the fourth consecutive month driven both by strong CDMA and GSM adds. India added a record 5.903M total subs in August
(excluding CDMA additions for state-owned MTNL and BSNL, which do not report monthly CDMA nos), up 9.5% from 5.391M adds in July and 49.3% above 3.953M in Apr, the last month to register a sequential decline in net adds.

India August CDMA net adds rebounded 16.2% m/m to 1.698M - the highest month ever - from an 11.9% decline to 1.461M in July and 1.023M in the Apr trough. GSM August net adds climbed a healthy but lagging 7.0% to a record 4.205M, resulting in a jump in CDMA's share of total India net adds to 28.8% in August from 27.1% in July, though this is still well below June's 34.2% share and roughly inline with the 28.2% YTD average.

All-in, the August figures out of India suggest quite robust end demand for handsets overall, and though rhetoric from Reliance continues to suggest the potential for increased emphasis on GSM at the expense of CDMA, CDMA continues to hold 28-30% Indian market share in the near-term.

Reiterate Neutrals. Despite healthy, although not accelerating, end-user demand for both CDMA and WCDMA handsets, QCOM's legal, contractual and regulatory hurdles continue to multiply across numerous fronts, chief of which, they believe, should be its contract negotiations with Nokia followed by the 6-party complaint brought to the European Commission. Unless and until the firm sees a positive resolution to the Nokia contract renewal issue, they remain Neutral.

Notablecalls: Not actionable but good to know category. Must say it surprising to see QCOM trade 20x 2007 EPS.

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