After CDMA, Royalty Issues May Haunt GSM Players

Jul 14,2006 00:00 by Newsdesk

In the backdrop of the controversy over Qualcomm's royalty structure with Indian CDMA giant Reliance Telecom, the debate within the telecom industry circles is slowly turning to the royalty structure which prevails in the GSM segment as well which is dominated by the likes of Nokia, Ericsson and Motorola.

According to industry observers, India needs to follow the Chinese practice of opening the market for only those patent holders that agree to share patents.

Last year the ministry of communications launched a campaign to encourage manufacturing of telecom equipment domestically.

Given that over 78 million of the nearly 105 million mobile customers in India are on the GSM platform, the impact of royalties in this space may be even higher. Various sources indicate a royalty fee per company of 1-2 per cent of the sales, taking the total fee (cumulative royalty fee) to around 10 per cent.

India imported GSM handsets worth around Rs 15,000 crore (Rs 150 billion) last year from China, which benefits from the laissez-faire on patents and fees.