India spearheads Docomo's new overseas investment strategy

Wireless Intelligence
30 Jul 2009

NTT DoCoMo, Japan's largest mobile operator, has recently hinted it will step up its efforts to expand its international businesses via further investment in Asia and by increasing cooperation with the large Chinese mobile firms.

Last year, the operator - which is battling slowing growth in its domestic market - set a target of 10% of its sales to come from foreign ventures within a decade. For its fiscal-year 2008 (which ended 31 March 2009), DoCoMo's revenue from international operations totaled 90 billion yen ($966 million), representing some 2% of total operating revenues of 4.44 trillion.

It forecasts that international revenues will grow to 100 billion yen (2.3% of projected total revenue) in its current fiscal year, which ends in March 2010.

Currently most of its international sales derive from international dialing and roaming rather than contributions from its overseas affiliates. International dialing and roaming accounted for 54.1 billion (60%) of international revenues in DoCoMo's FY2008.

DoCoMo divested many of its earlier overseas assets - which once included equity stakes in major international operators such as AT, KPN and Hutchison/3 - at the beginning of the decade, incurring significant write-down costs in the process.

In the last couple of years, however, the operator has steadily increased its international footprint. As our 1Q09 group data shows, DoCoMo now has interests in mobile operators in eight Asian markets outside Japan.

Its most significant (and most recent) overseas venture is a 26% stake in India's sixth-largest mobile operator, Tata Teleservices (TTSL), which it acquired for 264 billion ($2.8 billion), closing the deal in March.

On both a total and proportional basis, India is now DoCoMo's second-largest market in terms of subscriber connections. Investors have questioned the size of the investment for a minority stake but DoCoMo has been keen to highlight the key role the firm will play in TTSL's future expansion.

The firm - currently a CDMA-based operator - launched its new GSM-based network in the circles of Chennai and Tamil Nadu last month under a new brand, "Tata DoCoMo".

The new network is expected to be rolled-out across the entire country by year-end at a cost of around at $2 billion, though DoCoMo has said that build costs for the GSM network are around 30%-40% lower than usual because TTSL will use its existing CDMA facilities.

Rollout of W-CDMA is also expected once 3G licenses are issued, scheduled for later this year.

DoCoMo has given no firm projections for a return on its investment in India, but has forecast that the new GSM network could attract 100 million customers (net additions) over the next three years.

According to Wireless Intelligence data, total Indian connections grew by 39.2 million to 391.8 million in 1Q09, making it the fastest-growing mobile market in the world in terms of volumes, while penetration stands at only 34%. By contrast, connections in Japan grew by less than 2% in the quarter.

Other recent investments by DoCoMo have targeted similar high-growth Asian markets that are at an early-stage rollout of W-CDMA. In April 2008, DoCoMo and long-term partner KTF of South Korea jointly acquired a 33% stake (16.5% each) in new Malaysian W-CDMA operator U-Mobile.

Related content

No Comments Yet! Be the first to share what you think!