Phone companies ally against Qualcomm

7 Nov 2002

An agreement between Nokia, Ericsson and Siemens aimed at forcing Qualcomm to lower the cost of payments it charges for patents for its WCDMA (wideband code-division multiple access) may be the opening salvo in a new war over mobile patents and standards.

Nokia, Siemens and Ericsson agreed today to lower royalty payments for wireless technologies in order to boost their chances of winning agreements with phone operators and application developers over WCDMA champion Qualcomm.

Summed up by analysts as a ‘declaration of war’, the aim is to force Qualcomm to lower the royalties it asks for its cdma2000 patents. However, since Nokia and its partners own a significant number of other patents in the realms of CDMA, GSM, GPRS (general packet radio services and 3G (third generation) technologies, analysts also believe that it may be an effort to get phone operators and application developers to operate without using Qualcomm’s patents at all.

It is understood that Fujitsu, Matsushita, Mitsubishi Electric and Sony have all expressed interest in joining the agreement.

In a related development that could be construed as Qualcomm’s ultimate weapon in this new wireless war, the company has begun shipping a chip that enables a mobile phone to work on almost any of the world’s wireless networks regardless of what communications standard it is working on.

The MSM6300 chip basically caters for two phones in one, with enough silicon to cater for the CDMA standard and the European-championed GSM standard. Both standards power 90pc of the world’s networks, but mobile users have to choose one over the other. With the new Qualcomm chip, a single phone will be able to work almost anywhere in the world.

While predominantly European manufacturers like Nokia, Ericsson and Siemens, which cater for both standards but focus on GSM in their home markets, have yet to express interest in the new chip, North American and Asian phone companies, including Sprint, Verizon and KDDI have expressed an interest in selling phones with the new chips inside.

Royalties are the most profitable type of revenue for Qualcomm, generating 59pc of the company’s pretax profits.

By John Kennedy