There is no official source on that which I could quote. But it is what I have been told by people involved.

There is another aspect, a lump sum of 5-15$ per unit might look like a lot of money for M$, but over a 2y period thats not much. All that such a deal would do is to make the phone a bit more expensive, same as if another earthquake hit and some parts like CPUs or RAM became more costly. Carriers would easily swallow that for subsidized phones. All the search revenue, App store revenue etc. would still go to others like Google. And most important, the customer would be lost to M$ - If M$ wants to take a significant market share in mobile, collecting royalties on Android is not the way.

I do not know the licensing fee involved with WP7, but demanding higher royalties on Android devices might be a way to push vendors into switching.

Also, 5-15$ is significant when comparing it with the manufacturing costs of the device (the iPhone 4S CPU is estimated at 15$ by iSuppli (http://www.isuppli.com/Teardowns/MarketWatch/Pages/For-the-i...).

Vendors have to make sure they build phones that they can sell, the phone being simply $15 cheaper won't do that. Apple sells more 4S than 4 and more 4 than 3GS, so it cannot be that the price is the only decision point

The Citi claim is based upon absolutely nothing. For that matter every single "Microsoft makes $X from Android" are based upon nothing but speculation.

Show me a line item in either HTC or Microsoft's quarterlies validating that?

It is interesting that virtually every agreement that Microsoft has achieved has been with vendors that sell Microsoft products.