The Hindu Business Line : Reliance seeks royalty waiver on `rural' handsets

With Qualcomm not agreeing to an across-the-board cut in royalty for CDMA handsets, Reliance Communications has now sought waiver of charges only for the rural areas. The telecom company is currently present in 4,500 towns and 3 lakh villages and is looking to expand its network to 6,000 towns and 4 lakh villages in the current fiscal.

Sources close to the negotiations between Qualcomm and Reliance Communications said that Mr Anil Ambani has proposed a model, which gives an option of a purchasing power parity-linked royalty structure.

Under this model, the royalty being charged by Qualcomm on a handset sold in the rural segment would be lower than what is being charged on a CDMA handset sold in the urban market. Reliance proposes to use the Government's criteria of defining urban, semi-urban and rural areas to finalise the locations where the royalties on the network equipment and handsets should be waived. According to industry estimates, the move would result in a 10 per cent lower capital expenditure for the operators.

For consumers, it would have resulted in CDMA handsets being available at 12-15 per cent lower than the current price, said an industry source in favour of a reduction in royalty.

Reliance had earlier sought an across-the-board reduction in royalty charges for CDMA handset to bring it at par with the charges claimed by Qualcomm from handset vendors in other countries. Qualcomm had not agreed to a reduction on the grounds that the royalty being charged in India was the lowest in the world. Qualcomm also said that it was working towards lowering the cost of the handset through technological means.

Under the new proposal mooted by Reliance, it has suggested that the royalties be waived off for the low-cost handsets in order to make CDMA entry-level handset costs at par with entry-level GSM handsets.

Law suit

Meanwhile, Qualcomm has come under pressure elsewhere in the world. Two largest CDMA chipmakers Texas Instruments and Broadcom, both licensees of Qualcomm, have filed an anti-trust complaint against the technology giant with Fair Trade Commission of South Korea accusing Qualcomm of stifling competition in the mobile phone chip market.

Nokia has also pulled out from manufacturing CDMA handset devices and shelved a proposed joint venture with Sanyo.

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