The Hindu Business Line : Grappling for that edge

Is Code Division Multiple Access (CDMA) technology for wireless telephony really less attractive than Global System for Mobile Communication (GSM)? And when did it suddenly become less attractive?

In India, this issue broke into debating territory some months ago, when the largest CDMA player in the country, Reliance Communications, applied for GSM spectrum in the two key circles of Mumbai and Delhi.

What puzzles the Indian industry is the rather widely differing responses of the largest two CDMA players on the issue. Reliance Communications' response was strong, it did not consist of just words, the company actually went ahead and applied for GSM spectrum.

Tata Teleservices, the other major player, was almost mysterious about what it actually felt on the issue.

One of the reasons turned out to be that Reliance Communications felt that the royalty charged on wireless telephone chipsets by CDMA technology provider, the US-based Qualcomm Inc, was too much. Less was being charged by Qualcomm elsewhere, in other parts of the world, it indicated. The Qualcomm chief, in fact, visited India shortly afterwards and met with Reliance Communications, but both sides were apparently unrelenting in their stance.

Tata Teleservices, on the other hand, seems to be unaffected by the royalty issue. At various times after the issue broke, its chief, Darry Green, has said that the company is committed to growing the CDMA business in India.

Tata Teleservices does not intend to apply for GSM spectrum, said Green, replying to a question at a news conference over a month ago. He also did not concur with the view that Qualcomm's royalty fees made for a large component of the price of a CDMA handset.

He said that Qualcomm is coming up with a single integrated chipset (combining filters and additional components) that is likely to lead to more competitive pricing of CDMA handsets.

Reliance Communications made its move when there seemed to be criticism or rejection of Qualcomm across the world. Nokia had announced that it would not make CDMA devices citing Qualcomm's royalty demands. Telstra, telecommunications provider in Australia, too had similar complaints.

Qualcomm is betting on the fact that all GSM players will eventually have to move towards CDMA, when they have to provide 3G services with quality data and voice.

But several analyses have pointed a not-so-rosy future for CDMA. Credit Suisse First Boston in a report said that GSM is winning the race with more upside, referring to the Indian market. It also noted that Reliance's decision to provide a GSM overlay on its network could be a precursor to the company deploying a full GSM network over time.

Morgan Stanley Research too says that there were long-term concerns for Qualcomm, and challenges to sustaining or growing its licensing business.

Worldwide, CDMA subscribers numbered 300 million as at end December 2005, growing 25 per cent over the year, while GSM subscribers numbered 1.7 billion, having grown 35 per cent over the same period. A larger growth on a larger base.

It also noted that some CDMA carriers, VIVO operating in Brazil, and Reliance Communications, were indicating migrating to a GSM roadmap.

Will operators in all emerging markets eventually settle for dual-technology operations, when they can provide cheaper services and handsets to an economy class and value-added data services to the well-heeled?

Qualcomm's moves on its royalty and licensing issues and governments' readiness to award spectrum will decide the issue, feel analysts.

kripram@thehindu.co.in