For quite some time now, CDMA handsets in South Korea, Japan, or elsewhere in the world have been manifesting the latest in the convergence of voice, data, and video communication, besides making the ultimate style statements. They have been in the exclusives’ list of objects of desire. On the contrary, thanks to BSNand MTNL, CDMA handsets in India are imagined to be some primitive equipment capable of doing nothing except making cheap voice calls and hence, undesirable.

Guess What?
India’s Closer to 3G!
Well, for alpracticapurposes, those ugly-looking bulky CDMA handsets doled out by the state operators are a history now. With Tata Teleservices and Reliance Infocomm launching CDMA2000 1X-based limited mobile service in December 2002, the possibility of Indian consumers hooking on to the world’s most advanced and feature-rich handsets appears to be a reality. Even though regulations do not allow anything other than voice on the limited mobility services, the handsets that CDMA vendors would be offering to service providers would be full-featured. Some of these handsets would be capable of providing the users access to a variety of multimedia content, including news clips, sports highlights, movie previews, music videos, personalized video messages, and more. Just consider this. While it would take 41 minutes to transfer a three-minute song in MP3 format on a GSM handset, the same could take just 1.5 minutes on a CDMA2000 1X handset! Some of these handsets come with around 40 polyphonic sounds, 65,536-color TFT LCD screens, and a digitacamera!

Of course, althis would mean value for money only when the government allows a fulrange of services in limited mobility. But that is a different issue altogether. "CDMA handsets being offered to the Indian subscribers are 3G-compatible. The significant thing is that state-of-the-art technology is being brought to India at the same time as it is being introduced in advanced markets like the US, Canada, and Japan," claims VP Chandan, president, Qualcomm India.

Costlier than GSM Phones
While it would still take some more weeks or even months before Indian CDMA subscribers get to use the full-featured handsets, one thing is clear. CDMA handset prices would be on the higher side to begin with as compared to their entry-level counterparts in GSM. While Tata Teleservices is offering entry-level handsets at Rs 7,000, Reliance has priced its handsets at Rs 6,600 (that’s the cost component of the handset in its Rs 21,000-package that includes 400 minutes of free calls every month for three years). In other words, all that talk of CDMA handsets being available in the range of Rs 2,000 to Rs 4,000 has turned out to be just a talk. However, though not as affordable as the GSM phones at the entry level, CDMA phones come with many more functionalites and capabilities. These advanced features offset the high price of CDMA handsets to a large extent.

CDMA2000 1x Handset Vendors Audiovox Casio Cellvic Ericsson Handspring Hanwha Hitachi Hyundai KTF Kyocera LG LG Telecom Motorola Nokia PC-EPhone Samsung Sanyo Sanyo-Tottori Sewon SK Teletech Sony-Ericsson Synertek Toshiba

Both the government and the basic operators have long been creating the impression that the limited mobility service would be the mobile phone service of the poor and would serve as a cheaper alternative to GSM services. The call charges (of Rs 1.20 per 3 minutes and free incoming calls) do support this claim. But then why are service providers offering entry-level CDMA handsets that cost almost 100 percent more than their GSM counterparts? Well, CDMA phones have historically been 30-40 percent costlier than their GSM counterparts, worldwide. This is largely because the number of CDMA2000 1X phones sold annually is much less than that of the GSM phones. Also, CDMA phones are much more advanced than their GSM counterparts owing to the fact that the underlying CDMA networks allow far greater data speeds.

Both vendors and service providers argue that the price of CDMA handsets will come down once volumes grow in India.

They cite the example of GSM phones, which used to initially cost around Rs 25,000–30,000 and are now available for as little as Rs 3,000. So one should conclude that the same thing would happen with CDMA handsets. However, one should note that the price of GSM handsets is falling too. So in the months and years to come, CDMA phones will continue to be costlier than their GSM counterparts.

Also, the gray market played a vital role in the rapid spread of GSM handsets during the initial years. No such driver may be available for the CDMA handsets. This is because the dynamics of the CDMA wireless service will enable operators to prevent the emergence of a gray market. Nevertheless, Sanjeev Sharma, country manager, Nokia India, observes that considering the size of the Indian, Chinese, and Brazilian markets, manufacturers will be forced to design more affordable CDMA handsets.

Korean Vendors Rule
For the record, whatever market for CDMA handsets exists in India, Korean players—LG, Hyundai and Samsung—dominate it all. GSM handset vendors like Nokia (which commands around 44 percent of the global GSM market), Motorola, and Sony Ericsson had kept themselves away from the market so far.

Korean players have gained an early-mover advantage by reportedly signing big deals with Tata Teleservices and Reliance Infocomm. Besides, they have much more to offer in terms of the range of products and prices as compared to their GSM counterparts. Also, Koreans seem to be taking the Indian market much more seriously than others, and have been launching products with much noise. LG is planning to spend $5 million on marketing in the next one year, while Samsung will spend $2 million over the next three months. Koreans are also ready to design handsets according to specifications provided by Indian operators, keeping in mind the price and features suitable for the country. "LG is planning operator-specific models. This will be an ongoing process," KK Kushwaha, vice-president, LG Electronics, informs.

An important development has been that Nokia, the world leader in GSM phones, has launched one of its CDMA handsets (Nokia 6385) in India. It is reportedly planning to bring in two more models next month. Such moves make the intention of GSM vendors amply clear—they also want a share in the emerging Indian CDMA pie. While it is too early to comment on the outcome of Nokia’s move, it will draw considerable attention from CDMA players. Globally, Nokia is banking heavily on CDMA phones to increase its market share in the wireless business. Currently, Nokia holds around 10 percent share in the CDMA handset market. "GSM vendors will take some time to enter the Indian CDMA market in a big way, but we are not underestimating their potential," Kushwaha says.

As of now, it seems unlikely that Nokia’s position in the Indian CDMA market could be anywhere closer to its leadership position in the GSM market, where Nokia has no real competitor except Samsung. Interestingly, globally, the CDMA handset market is much more competitive than the GSM one. There are around 23 vendors across the world offering around 200 CDMA2000 1X handsets. And there are many more, primarily Chinese vendors, waiting to enter the market.

Is Manufacturing Hot Air?
For quite some time now, there has been a lot of talk about manufacturing CDMA handsets in India instead of importing them.

The rationale is that local manufacturing will make handsets affordable for the price-sensitive as well as low-income group consumers. The leading Korean CDMA vendors, Samsung and LG, have often expressed the desire to set up manufacturing base in India. Even some Indian companies, including Reliance Infocomm, are said to be keen to manufacture handsets locally, due to cost considerations. Among other wannabes, is a leading consumer electronics company. But then, everybody is waiting for volumes to pick up. Qualcomm’s Chandan rules out manufacturing at the present stage and anticipates some development on this front only in 2004, on the assumption that CDMA subscriber base would have already crossed the 10-million mark by then.

As of now, Reliance Infocomm is reportedly the only player to have taken some initiative on the manufacturing front. In fact, industry watchers believe that before anybody else, Reliance Infocomm would be the first company to commence manufacturing, at an opportune time. The company is believed to have put some sort of infrastructure in place but is yet to finalize on the collaboration aspect, among other things.

The Outlook
With Qualcomm’s more efficient and cost-effective chip (0IF) already in the market, the ex-factory price of CDMA handsets at the entry-level is likely to drop to around $65. Currently, the ex-factory price starts at $80-85.

Another interesting bit. It is a misconception that CDMA phones are not SIM-based. In China, it is mandatory for CDMA phones to be SIM-based and there are around 3.7 million subscribers using SIM-based CDMA phones. Even though nobody is thinking of bringing SIM-based CDMA phones to India yet, market forces may force vendors and operators to bring in SIM-based phones to India.

More than anything else, the availability of multi-mode phones, i.e. phones that can work on multiple standards, will change the dynamics of wireless communication altogether. Phones based on Qualcomm’s MSM 6300 chip, which can support GSM, GPRS, and CDMA2000 1x, are expected to be in the market in the near future. "Multi-mode phones, which can also support CDMA 1x EVDO apart from GSM, GPRS, and CDMA2000 1x will be there in the market by the end of 2003," Rishi Dhingra, director, Qualcomm India, reveals. The availability of such phones will facilitate roaming agreements between GSM and CDMA service providers, and thus offer seamless anywhere-anytime connectivity to travelers traversing CDMA and GSM networks quite often.

Ravi Shekhar Pandey