Anil Ambani’s GSM move sets a cat among pigeons

Will he junk CDMA? The costs are prohibitive. So what's the gameplan?

NEW DELHI: Reliance Communications Ventures Ltd' application to the Department of Telecommunications (DoT) seeking spectrum for GSM services across the country has triggered a theory that the Anil Ambani-owned CDMA major may move over to GSM technology over a period of time.

A source in the government said, "the Reliance application suggests that the group wants to move over to GSM".

It is learnt that the group has sought spectrum for GSM services across the country, wherever it's available.

Also, Reliance Telecom, which already operates GSM services in eight circles with 2 million users, is planning a significant expansion with an investment of around Rs 1,500 crore.

This has come as a surprise as Reliance Communications already has almost 20 million CDMA users in the country.

Tata Teleservices, the other major CDMA player in the country which would be left alone if Reliance makes a switchover to GSM, was not available for comment.

Reliance Communications, which has been tight-lipped so far, has come out with an official comment on the issue on Thursday.

A company spokesperson said, "We are committed to pursue the world's leading mobile technologies, whether CDMA or GSM, to provide the best and most competitive services to our many million customers".

Industry interpretation of this statement has been varied.

An analyst argued that "it's all about spectrum play" as telecom mobile players representing both GSM and CDMA have been demanding more spectrum than what they are being allocated.

However, a DoT official said, "It may not be easy for Reliance to get additional spectrum for GSM services, unless they surrender some of their CDMA spectrum".

DoT, it is learnt, has asked Reliance for details on their GSM rollout plan and as to where it would like to vacate its CDMA spectrum.

If it's not for more spectrum, the switchover to GSM could be for the high royalty fee being charged by CDMA technology licensor Qualcomm, a source said.

While in India, Qualcomm charges a royalty in the range of $13 to $15 per CDMA chip, it's much less at around $3 in countries such as China and Korea, the source added. Qualcomm officials refused to comment on any issue.

As against GSM's open platform, CDMA is a proprietary technology. That's the reason why a CDMA subscriber has to buy a handset from a service provider such as Reliance or Tata Teleservices.

Giving an industry view, Ernst & Young head of telecom practice (India), Prashant Singhal, said a CDMA operator may not logically like to switch over to GSM completely because there is a huge cost involved.

Singhal said that the two technologies - GSM and CDMA - can perhaps merge for 3G services.

Also, if Reliance has to exit from CDMA, it needs to refund the handset cost to the subscriber or provide him with a GSM handset, an industry source said.

In the case of Reliance handsets, they are network-locked. There's no grey market also for such handsets, it is believed. With 20 million CDMA subscribers, the cost for handset itself would alone come to around Rs 5,000 crore (if a handset costs Rs 2,500). Also, it would lead to a high-degree of customer dissatisfaction.

Another problem is that of equipment, if there's no exchange. It is learnt that Reliance sources its equipment from Lucent, which is only into CDMA. "So, exchange will be an issue," the source said.

Besides, CDMA players will have a 3G advantage when it is launched, it is understood.

Globally, the Spain-headquartered Telefonica, a CDMA player, is one of the operators to have made a technology switch of some kind. But in regions such as Latin America, where the operator got into GSM, Telefonica operates both GSM and CDMA.

India is a GSM-centric country like most in other parts of the world. The US and Korea are considered CDMA countries in a big way. In India, there are 75 million GSM mobile subscribers, against 26 million CDMA subscribers. Globally, there are 2 billion GSM users and 318 million CDMA subscribers.

Meanwhile, China, which is the leading mobile phone country with over 400 million cellphone users, is experimenting with a home-grown technology-TDCDMA-for launching 3G services later this year.