DoCoMo takes another gamble in India

18 Dec 2008

While corporate planners in the rest of the world are bunkering down to survive the economic crisis, NTT DoCoMo is on a shopping spree. Its latest move is to invest $2.7 billion in India in a strategic alliance with Tata Bros.

DoCoMo is taking 26% of Tata's subsidiary Tata Teleservices Limited (TTSL), India's sixth mobile operator, which also owns Tata Teleservices Maharastra Ltd (TTML), the country's ninth largest carrier. DoCoMo and Tata Bros have made a joint offer to take 20% of TTML.

DoCoMo's big play in India comes shortly after completing its purchase of the AK Khan Group's 30% share of Aktel, Bangladesh's third largest mobile operator, for $350 million.

'This move comes from two things relating to DoCoMo's financial performance: declining revenue in the Japanese market is forcing it to invest overseas while the increase in operating income due the phasing out of handset subsidies is providing it with the means to invest abroad,' explained Michito Kimura, senior analyst at IDC Japan.

Looking at its track record overseas one wonders whether DoCoMo still has more money than sense and whether it has learnt from its mistakes in those recent disastrous investments in Europe and the US, which rang up more than $10 billion in losses.

In fact, DoCoMo's affair with Tata looks at first sight to be a case of love on the rebound as its Indian plans already endured a major setback in 2007 when it was forced to end its strategic alliance with Hutchison Essar after Vodafone bought a majority holding.

'I think that DoCoMo still doesn't have good enough planning, know-how and information to be successful overseas,' said Kimura.

But Tata clearly sees DoCoMo in a more positive light. 'The company is a market leader in Japan. This expertise will enable TTSL to ensure a world-class network and also to offer differentiated services,' said TTSL managing director Anil Sardana.

DoCoMo's investment comes at a time when TTSL is busy rolling out GSM networks in its 22 circles and will help finance the $1.5 billion GSM capex over two years.

But TTSL may need all the assistance DoCoMo can provide if it is continue its above average rate of subscriber acquisition as the newcomer. It is the only major Indian operator today without any GSM services.

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