SAN DIEGO -- November 14, 2001 -- Qualcomm Incorporated (Nasdaq: QCOM), pioneer and world leader of Code Division Multiple Access (CDMA) digital wireless technology, today announced its commitment to provide up to $266 million of equity financing in support of Vesper, a Brazilian CDMA wireless service provider. Qualcomm's commitment was made concurrently with an equity investment of $80 million by existing Vesper partner, VeloCom Inc. (a privately held corporation based in Denver, Colo.), as part of a complete re-capitalization of Vesper's balance sheet.
Qualcomm's investment, through the creation of a holding company, marks the completion of Vesper's financial restructuring. As a result, the holding company will be capitalized with 65% equity and 35% debt on a consolidated basis. Of the debt, approximately $100 million will be held at the operating company level, with another $100 million held at the holding company. Additionally, all remaining operating company and holding company debt has been extended through at least 2005, providing the holding company and Vesper with significant operational flexibility to support Vesper's growing business. The new equity, along with funds to be generated through certain other transactions, should fully fund Vesper's business plan and allow Vesper's new management team to focus on operational growth.
"With a footprint of more than 120 million pops covering over 70 percent of the country, including the three largest cities, Sao Paulo, Rio de Janeiro and Belo Horizonte, Vesper represents an important strategic asset for CDMA development in Brazil, one of the key markets in Latin America," said Dr. Irwin Mark Jacobs, chairman and CEO of Qualcomm. "After this investment, Vesper's enterprise value will be less than $5 per pop for the 1900 MHz spectrum and a fully installed CDMA network capable of supporting more than two million subscribers. These economics give us confidence that Vesper is well positioned to take advantage of the convergence of wireless voice and data services."
In addition to financial and managerial restructuring, Vesper's core business has been reorganized and redefined. With a fully financed and installed CDMA network that currently has the capacity to add more than one million new subscribers with little incremental capital investment, Vesper is positioned to be the low cost provider of fixed wireless services in Brazil. Furthermore, Vesper will have a unique product offering in the market called Vesper Portable. This portable product, made possible by ANATEL's approval of mobile phones in a fixed environment, when matched with value-based pricing, allows the redefinition of the competitive carrier model in Brazil.
Vesper's new management team is led by Luiz Kaufmann, chief executive officer. Previously, Kaufmann led the restructuring of Aracruz, the Brazilian pulp manufacturer. Under Kaufmann's leadership, Aracruz became the world's lowest cost provider and the first Brazilian company listed on the NYSE. Since joining Vesper, Kaufmann has successfully attracted several key managers with significant Brazilian telecommunications and marketing experience.
"Focusing on operations and simplifying our product portfolio will allow us to drive our costs lower, while innovative new services will create the differentiation that allows Vesper to attract significant market share," said Kaufmann. "These factors, combined with our flexibility to quickly and inexpensively upgrade our network to CDMA2000 1X next year and CDMA2000 1xEV-DO in 2003, give us a new range of voice and data products that will be unparalleled in the Brazilian market."
As part of this transaction, Qualcomm will become Vesper's largest shareholder. Qualcomm intends to support Vesper while it, together with VeloCom, seeks to partner with strategic investors and internationally recognized operators who will have the ability to successfully enhance Vesper's business and ultimately assume majority control. Qualcomm will also consider other strategic alternatives for Vesper such as spinning-off its investment in Vesper to shareholders in a transaction similar to the Leap spin-off in 1998. Lehman Brothers acted as financial advisor to Qualcomm for the Vesper transaction.
Qualcomm Incorporated (www.qualcomm.com) is a leader in developing and delivering innovative digital wireless communications products and services based on the Company's CDMA digital technology. The Company's business areas include CDMA chipsets and system software; technology licensing; the Binary Runtime Environment for Wireless™ (BREW™) applications platform; Eudora® e-mail software; digital cinema systems; and satellite-based systems including portions of the Globalstar™ system and wireless fleet management systems, OmniTRACS® and OmniExpress®. Qualcomm owns patents that are essential to all of the CDMA wireless telecommunications standards that have been adopted or proposed for adoption by standards-setting bodies worldwide. Qualcomm has licensed its essential CDMA patent portfolio to more than 100 telecommunications equipment manufacturers worldwide. Headquartered in San Diego, Calif., Qualcomm is included in theS&P500 Index and is a 2001 FORTUNE 500® company traded on The Nasdaq Stock Market® under the ticker symbol QCOM.
Except for the historical information contained herein, this news release contains forward-looking statements that are subject to risks and uncertainties, including the Company's ability to successfully design and have manufactured significant quantities of CDMA components on a timely and profitable basis, the extent and speed to which CDMA is deployed, the extent and speed with which the companies Qualcomm has invested achieve profitability, change in economic conditions of the various markets the Company serves, as well as the other risks detailed from time to time in the Company's SEC reports, including the report on Form 10-K for the year ended September 30, 2001, and the most recent Form 10-Q.
Qualcomm, OmniTRACS, OmniExpress and Eudora are registered trademarks of Qualcomm Incorporated. BREW is a trademark of Qualcomm Incorporated. Globalstar is a trademark of Loral Qualcomm Satellite Services, Incorporated. All other trademarks are the property of their respective owners.
November 14, 2001November 14, 2001Qualcomm Commits $266 Million for Strategic Investment in VesperQualcomm Commits $266 Million for Strategic Investment in Vesper