Posts Tagged ‘manmohan singh’

DoComo looks to India for growth

ntt-docomo-logoJapan’s NTT DoCoMo (NYSE – DCM) has been  struggling with sales at home, so it’s now betting on the Indian mobile market market by acquiring a 26% stake in Tata Teleservices. Mobile sales in Japan have now become stagnant, with a penetration of roughly 82% of the population (127M) carrying a mobile handset, carriers are now looking abroad for growth.

Compared to Japan, the technology deployed in India is noweher near as advanced or rich, but India is the world’s fastest-growing mobile market, adding as many as 9 million new customers a month. That’s why DoCoMo, the largest Japanese cellular operator, on Nov. 12 announced it is picking up a 26% stake, worth $2.7 billion, in Tata Teleservices, which is the 6th largest player in India.

The Indian market is very fragmented with mobile operators working in 19 identifiable circles. Each zone is allowed to have multiple private operators (earlier it was 2 private + BSNL/MTNL, subsequently it was changed to 3 private + BSNL/MTNL in GSM 900/1800, now each zone has 4-5 operators including BSNL/MTNL in GSM, and 2 private + BSNL/MTNL in CDMA).

DoCoMo expects there’s plenty more room to grow, too. India has just over 300 million subscribers, of which Tata Teleservices (which sells under the brand Tata IndiCom) has cornered about 29 million. With incomes rising sharply in urban India, and somewhat slower in rural India, estimates for growth in India’s market are pretty exuberant; Gartner Research, thinks that Indian mobile  subscribers could more than double, to 737 million, by 2012.

The DoCoMo-Tata deal is just the latest in a flurry of merger-and-acquisition activity involving India’s telecom industry. Vodafone paid $13.1 billion for a 67% stake in Hutchinson Essar last year, valuing each Hutch subscriber at more than $800. (That’s in a market where revenue per customer tends to be less than $10 a month, on average.)

DoCoMo officially started hunting for foreign acquisitions, even though its previous overseas forays had gone sour, resulting in as much as $15 billion in write-offs from one single investment in the 3G spectrum in the UK. In June, DoCoMo singled out emerging markets such as Bangladesh, Vietnam, Cambodia, Laos, and China as strategic battlegrounds. On June 16 it announced a $350 million deal to purchase 30% of TM International in Bangladesh.

The DoCoMo investment in Tata might get even larger. Because of regulatory requirements on the Indian side, DoCoMo will also co-float an open offer for at least 20% of the shares outstanding for a subsidiary, Tata Teleservices Maharashtra, which does business in the rapidly industrializing state of Maharashtra, home to the Indian financial capital of Mumbai. Any offer for 20% of TTML’s nearly 1.9 billion outstanding shares could cost more than $140 million, assuming the open offer does not include a premium.

If the open offer for the Maharashtrian subsidiary goes well—it is unclear what kind of premium Tata Sons and DoCoMo would offer—the two companies would face competition from both ends. Much larger players such as Bharti Airtel and Reliance Communications are keen to poach subscribers from smaller companies like Tata, but with an upcoming, multibillion-dollar 3G spectrum auction, and new licenses being handed out to foreign players, deep-pocketed new entrants will be making splashy entrances.

Canny play fro DoCoMo, which I believe will come off, purely as Reliance & Airtel are spending so much time competing, whilst also trying to stave off Vodafone Essar. Further information on the Indian mobile market can be read here at Consultant Value Added

UPDATE : State owned MTNL (Mahanagar Telephone Nigam Ltd) soft launched 3G serevices in Delhi last Thursday (12/12/08), Services will initially be restricted to the main business and political areas of the circle, with a commercial launch expected to follow in January 2009. During what it considers a ‘soft-launch’ the operator will offer free access to the new services in some of the central areas of Delhi. MTNL will offer the services under the ‘Jadoo’ brand name including internet, videoconferencing and gaming.

Expressing concern over slow pace of broadband growth, Prime Minister Manmohan Singh said, “I believe that 3G and Broadband Wireless Access will give a fillip to mobile broadband penetration. So far, India’s success in extending broadband has not been satisfactory. These services were launched in January 2005 and till now we have managed a very modest penetration. I expect that 3G will become the predominant platform on which we will be able to build and deliver upon India’s broadband objectives”. He also said that “3G and wireless broadband would bridge the much needed digital divide between the rural and urban India. For urban India, 3G and wireless broadband will offer convenience of mobility with the rich multimedia content of the internet”. MTNL, a service provider in Delhi and Mumbai, would extend the 3G services in Mumbai by the end of next month.

Source : Economic Times, India