JPMorgan Says Qualcomm China Settlement Has 'Positive Read-Across' For Ericsson And Nokia

Sandeep Deshpande of JPMorgan on Monday commented in a note that QUALCOMM, Inc.'s QCOM settlement with Chinese regulators and its new licensing terms in China are a positive for European wireless IPR holders. "We would argue that in only 4G, Ericsson [ERIC] and Nokia [NOK] have equivalent or possibly better positions to Qualcomm in standards essential IPR," Deshpande wrote. "However given that Qualcomm ‘settled' royalty rates a long time ago, royalty rates charged by Ericsson and Nokia may not be able to be near these very high levels." The analyst also notes that Qualcomm's settlement is significant because it legalizes in China the system now being challenged by Apple AAPL where royalties are charged on average selling price of devices. In addition, the settlement recognizes a 5 percent royalty on 3G+4G or 3G only devices at five percent and 3.5 percent royalty on only 4G devices as a standard valid royalty rate to be paid by Chinese vendors on handset average selling prices. Deshpande concludes by stating that China has signaled it is now accepting Western IPR royalty model in the handset model and that Ericsson could begin IPR monetization in China post this settlement while Nokia will likely continue to focus on monetization outside of China over the next two to three years.