* Regulator eyes license terms with Japan handset makers
* Qualcomm says will respond to draft order
* Qualcomm shares close down 1.84 pct on Nasdaq (Adds regulator, source comments)
TOKYO/NEW YORK, July 28 (Reuters) - Japan's antitrust regulator has sent Qualcomm Inc QCOM.O a draft order saying that it illegally pressured Japanese handset makers into unfair licensing agreements, two sources familiar with the matter said.
Japan's Fair Trade Commission (FTC) is probing the wireless chip and technology developer's cross-licensing agreements with handset makers such as NEC Corp 6701.T, Panasonic Corp 6752.T and Sharp Corp 6753.T, the sources said on Tuesday.
“Japanese handset makers have no choice but to use Qualcomm’s chips and they swallow demands granting Qualcomm free access to patents,” said one source, who asked not to be named before an official announcement by the watchdog.
“The probe involves Qualcomm’s agreements with all Japan’s handset makers.”
The draft order comes on the heels of a roughly $200 million fine from the Korea Fair Trade Commission last week.
Qualcomm said that it had received a draft order from Japan’s FTC but that it could not comment in detail until it had a full translation of the Japanese document.
But it said that “it appears that the draft is directed at common, industry-standard licensing terms” which Qualcomm described as “pro-competitive and the subject of intense negotiations with very substantial Japanese companies.”
Qualcomm, which derived about 11 percent of its total revenue from Japan in the first nine months of this fiscal year, declined further comment. The company’s spokeswoman, Christine Trimble, said the draft’s contents were confidential.
Japan’s FTC officials also said they could not comment.
Piper Jaffray analyst Michael Walkley said more details were needed to gauge the impact for Qualcomm investors.
Japan is a much smaller market for Qualcomm than Korea, which Walkley expects to account for almost 30 percent of the company’s revenue this year.
Analysts said last week that they expected the Korean sanctions, which have yet to be confirmed in a written order, to have little impact on Qualcomm because its high-speed wireless chip business was unaffected by the order.
Qualcomm said it had not yet responded to Japan’s draft order and was told it would have the right to file a written response before the FTC makes a final decision and that it intended to do so.
The company’s shares closed down 87 cents or almost 2 percent at $46.48 on Nasdaq after the news. (Reporting by Mayumi Negishi in Tokyo and Sinead Carew in New York; Editing by Leslie Gevirtz)
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