Royalty rates for CDMA vs W-CDMA -- Selected Conference Call Segments
Below I have transcribed several segments from the March 26, 1999 and April 20, 1999 Qualcomm conference calls. The selected segments address the question of royalty payments for CDMA versus W-CDMA.
(Note: I had difficulty hearing some of the analyst's names and companies, as noted below.)
-------------------------------------
1999 Conference Call 3/26/1999 44 min. Question and Answer Session with QUALCOMM Management on Developments with Ericsson
Entire event: 1999 Conference Call (44 min.)
bestcalls.com
-------------------------------------
Time Mark: 13:35
[????], CIBC Oppenheimer
CIBC: Yes, good morning gentlemen. Back to the royalties, let's talk for a minute as we look into 3G here. When we get to 3G, does the implication forward imply that if you manufacture a W-CDMA phone, that you will pay a royalty to Ericsson and similarly, if Ericsson manufactures a CDMA 2000 phone, that they will pay a royalty to Qualcomm?
QCOM: As far as the royalties on the different possible modes of operation of the standard, they are uniform across the modes and so any of these royalties that have been discussed apply to CDMAOne, they apply to any of the ones, CDMA modes in 3G, they apply equally to all of those.
CIBC: So then to clarify, just in response to the prior question, you said that you will not pay a royalty to Ericsson on the manufacture of CDMA phones that would then apply to 3G but they will pay you a royalty if they manufacture a 3G phone.
QCOM: No, that's not what I said. I said that they will pay us a royalty on all CDMA phones that they manufacture, no matter what type that is. We also will pay them a small royalty in the future on phones that we manufacture whether those be CDMAOne, Wideband CDMA, CDMA 2000, whatever.
CIBC: And the one final question, to a future licensee of 3G, will they then have to negotiate with Ericsson and Qualcomm for IPR?
QCOM: If they buy ASICs from us, then they get the pass-through rights to Ericsson's patents... essential patents. If they do not buy ASICs from us then they will have to talk to Ericsson about any patent portfolio that they have.
------------------------------------------
Time Mark: 31:35
Maryann Dolan(?), with [????]
Maryann: Is there any case in which Ericsson doesn't pay you royalties, I mean if they use a different chip, or if they do something different, I mean is there anywhere they don't pay you?
QCOM: No, on the handsets again, for CDMA telephones, then regardless of the type, the royalties rates are the same. If there was some completely different technology that we didn't have any patents in, then that would be a different issue.
-------------------------------------------
Time Mark 34:40
Marc Cabi, CS First Boston
Marc: Congratulations to both companies on a very nice transaction. I was wondering if you could specify how the royalty arrangements will differ between CDMA2000 and W-CDMA between the two companies as third generation systems come about? Have those been determined yet, or are those yet to be determined?
QCOM: Well again, the royalties with regards to Ericsson and Qualcomm, there's no distinction between whatever modes do come out in the third generation and so if W-CDMA and CDMA2000, or direct sequence and multi-carrier, whatever the details are, the royalty rates are independent (his emphasis) of which of the modes are being used for CDMA and so it's not [that issue, it is solved]û between the two companies. It's interesting because there has been some speculation by a number of other companies that they would get different royalty rates, a way to reduce or have no royalty rates in the event of the use of W-CDMA. I think it's quite clear that that may not be a correct assumption.
---------------------------------------
û I'm not certain of the wording of this phrase.
=======================================
1999 Q2 Earnings Conference Call 4/20/1999 68 min. Q2 Earnings Conference Call
Section 5: Q & A (43 min. 41 sec.)
bestcalls.com
Time Mark: 11:15
Mark Roberts, Everen Securities
Mark: Irwin, do I understand that, for example, as France moves forward in licensing new spectrum, and has talked about moving forward with W-CDMA, your agreement with Ericsson, does that make it such that it's sort of a forgone conclusion that you'll be getting net royalty payments on W-CDMA equipment sold into Europe, if that's the mode that they choose, or will it just be royalty payments on equipment that is
designed for the true 3G 3-mode product?
QCOM (IJ): No, I think that with this agreement with Ericsson, some of the static that has existed hopefully has been lowered. We would expect to have royalties equally depending on whichever of these modes are adopted.
Mark: OK, so essentially, as we move forward in 3G, even if it's a W-CDMA type equipment, you'll essentially be getting royalties on all the equipment sold into Europe as well, which currently, obviously is all GSM so that's not a market that's open to you?
QCOM (IJ): We anticipate that is the case. There could be challenges to patents in Europe, in fact I'm sure there will be, but we have many, many patents. Again, in our agreement with Ericsson, I think this was recognized in that the royalty agreement applies equally to all of the different modes.
Mark: Ok, and just my last question, to follow up on that, is there any sort of separate discussions that you need to have with Nokia with regard to third generation intellectual property or does the agreement with Ericsson generally cover most of the IPR challenges?
QCOM (IJ): No, I think that there will be discussions with other carriers. Some have licenses that do apply. Most do not, and so there will need to be further discussions to extend the licenses. I also expect that there will be some manufacturers who have perhaps focused more on Europe who will now be needing to look at CDMA licenses. So, we see that positively. By the way, in your statement on France, I'm not sure where France is, but the European Union appears to have mandated a requirement that the standard used for this new spectrum would be a standard approved by ETSIý. Whether ETSI approves the entire ITU 3-mode CDMA standard, or a more restricted one is still open. We would hope that following an ITU acceptance of the 3-mode CDMA standard that the various regional bodies, standards bodies, would also adopt that standard, so that, that would allow operators to make a market place decision how best to satisfy their customers. But that's not assured at this point so we'll have to watch that.
------------------------------------------
ý European Telecommunications Standardization Institute |
