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CDMA Deal - HFCL gets Qualcomm licence

October 15, 2006
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The US-based Qualcomm Incorporated has signed a commercial CDMA2000 subscriber unit and modem card licence agreement with Himachal Futuristic Communications Limited (HFCL). The first of its kind agreement in India, it gives HFCL the patent licence to develop, manufacture and sell 3G CDMA2000 mobile handsets, fixed-wireless phones and line modem cards.

Aiming at manufacturing over 4 million handsets and fixed-wireless phones annually, HFCL is drawing up investment plans worth Rs 250-300 million to upgrade its plants in Solan (Himachal Pradesh) and Chennai.

As per the current plans, two-thirds of the locally manufactured phone sets are to be sold in India while the rest can be exported. "There is a requirement of 2025 million CDMA phones a year and we will be able to fulfil about 10-15 per cent of that supply need," says Mahendra Nahata, chairman of HFCL. He hopes to achieve a turnover of Rs 6-8 billion through this order.

Qualcomm is, however, not softening its stand on the royalty issue –­ the bone of contention with CDMA operators in India like Reliance Communication. The company has made it clear that HFCL will have to pay royalties on chipsets at global rates (about 5 per cent of the handset cost).

But despite royalties, the prices of CDMA phones are expected to drop by 45 per cent due to savings in import duties. Already, the price of entry-level Qualcomm mobiles, which was about $40 in June 2006, has fallen to $38 due to technological innovations. This, according to analysts, could decline by another $2 as a result of the agreement with HFCL.

Says Kanwalinder Singh, president of Qualcomm India: "Our prices have already fallen without any change in royalty terms. We are looking for as many OEMs in India as we can find. Our effort will be to bring down prices and we will provide HFCL all the technology, design and handset pretesting support that it requires."

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