SEOUL/NEW YORK?South Korea's antitrust agency fined Qualcomm Inc. $208 million on Thursday (july 23) and ordered the U.S. wireless chip and technology company to stop discriminating against companies using rival products

Analysts said they do not expect the decision to hurt Qualcomm much and pinpointed investor disappointment over its current-quarter revenue forecast as the bigger reason for a 2 percent drop in Qualcomm's shares Thursday.

The Korean Fair Trade Commission (KFTC) ruling was a key decision for Qualcomm, which counts Korean mobile phone makers Samsung Electronics Co. Ltd. and LG Electronics Inc. as its biggest customers.

While the KFTC said Qualcomm's CDMA chip business violated Korean competition law, the company noted that it did not affect its WCDMA chip business, which is a fast growing market segment with multiple competitors.

Analysts said the fine was too small to hurt financially and that any changes required for its CDMA business should not hurt its chip sales because Qualcomm, the inventor of CDMA technology, has so few competitors in that technology.

"Its hard to imagine any change in business practice that would upset the CDMA business that Qualcomm has with LG or Samsung," Morgan Keegan analyst Tavis McCourt said.

However Qualcomm said it would appeal the KFTC's decision if its final statement on the matter, which is expected to be published in the coming months, still includes the fine.

"There has been no illegal activity," Qualcomm Korea head Cha Young-koo told reporters.

The KFTC, which had been investigating the case for more than three years, said in a statement that Qualcomm abused its dominant position in the local market for code division multiple access (CDMA) mobile phone chips.

Qualcomm held a 99.4 percent share of that market in 2008.

"When licensing its CDMA mobile technology, Qualcomm levied higher royalties on companies that used modem chips supplied by rival companies," the commission said.

Qualcomm also provided clients with rebates for using its own chips, it said, adding that anti-competitive business practices helped the U.S. company maintain its near monopoly for more than 10 years in South Korea.

Qualcomm, which competes with Texas Instruments Inc. and others in the market for cellphone chips, has also been under investigation by the European Commission in Brussels for anti-competitive behavior.

Qualcomm said the difference in royalties and other types of incentives were part of marketing and based on agreements with Korean clients.

It said in a statement issued from its U.S. headquarters that the findings of violations were based on "serious factual and legal errors."

The fine of 260 billion won ($208 million) is the largest the KFTC has issued against a single company.

Qualcomm also said it had no indication of how the "excessive and unwarranted" fine was calculated "other than a reference to Qualcomm's significant Korean revenue."

South Korean media reports estimated Qualcomm's annual revenue from Korean makers at 2.5 trillion to 3 trillion won.

Qualcomm said on Wednesday it expected fiscal year 2009 revenue to be between $10.25 billion and $10.45 billion.

Analysts said the regulator's ruling was unlikely to have an immediate impact as handset makers usually have long-term contracts with Qualcomm.

They said there was no viable alternative to Qualcomm for companies such as Samsung and LG, who rely heavily on Qualcomm's technology for key mobile phone standards such as CDMA 2000 and W-CDMA.

Qualcomm shares traded 2.8 percent lower at $47.09 on Nasdaq shortly before the close, after falling as low as $46 in the session.

By: Rhee So-eui and Sinead Carew

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