Qualcomm said it will pay a fine of $975 million and modify its business practices as part of an agreement to settle a long-running antitrust dispute in China.
The mobile technology giant said it has reached a resolution with China’s National Development and Reform Commission (NDRC) regarding the commission’s investigation of Qualcomm under China’s anti-monopoly law (AML).
Reuters noted that the agreement ends a 14-month government investigation into anti-competitive practices and that the fine is the largest in China’s corporate history.
Although it expressed disappointment with the results of the investigation, Qualcomm said in a statement that it will not contest the NDRC’s finding that Qualcomm has violated the AML and has agreed to implement a rectification plan that modifies certain of its business practices in China.
As part of the agreement, Qualcomm has agreed to lower its patent rates in China. The company will offer licences for its current 3G and 4G essential Chinese patents separately from other patents. For companies opting for the new agreement, Qualcomm will calculate royalties based on 65% of the phone’s selling price, instead of on the whole price.
Reuters said it is now being speculated that concessions made to Qualcomm’s licensing business in China could affect the company’s licensing deals elsewhere.
"That’s the first time I’ve ever seen them in writing agree to that and it begs the question of why 65% is the right number in China and it’s not the right number everywhere," said Bernstein analyst Stacy Rasgon, Reuters reported.
Qualcomm will be relieved that the case has at least been brought to a close, removing an obstacle to its growth in a market with some of the mobile industry’s fastest-growing smartphone manufacturers including Xiaomi, Lenovo and Huawei.
“We are pleased that the investigation has concluded and believe that our licensing business is now well positioned to fully participate in China’s rapidly accelerating adoption of our 3G/4G technology,” said Derek Aberle, president of Qualcomm. “We appreciate the NDRC’s acknowledgment of the value and importance of Qualcomm’s technology and many contributions to China, and look forward to i ts future support of our business in China.”
Qualcomm also updated its financial guidance for the fiscal year ending 27 September 2015 to revenue of $26.3 billion to $28 billion compared to its prior guidance range of $26 billion to $28 billion.
Including the $975 million charge related to the fine imposed by the NDRC, diluted earnings per share are estimated to be $3.56 to $3.76, compared to the prior guidance range of $4.04 to $4.34.
