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DOCOMO TO BUY STAKE IN TATA TELESERVICES – Japanese operator to get foothold in India

Posted by Gilmour Poincaree on November 14, 2008

Posted to the web on: 13 November 2008

by Sachi Izumi and Devidutta Tripathy

Reuters

TOKYO — NTT DoCoMo will pay $2,7bn for a 26% stake in Indian telecom Tata Teleservices, giving TATA TELESERVICESJapan’s top cellphone operator a foothold in the world’s fastest-growing major cellphone market.

DoCoMo’s deal with Tata Teleservices follows a $350m investment in Bangladesh’s third-largest cellphone carrier as it speeds up its expansion beyond a mature home market and adds to the record $63bn of overseas acquisitions by Japanese firms this year.

But as DoCoMo expands, salt-to-software conglomerate Tata Group — the parent of unlisted Tata Teleservices and the flagbearer for corporate India’s recent overseas expansion — has put its plans for acquisitions on hold due to the global credit crisis.

DoCoMo will also make an open joint-tender offer with Tata Sons, the holding firm of the group, to buy NTT DoCoMo up to 20% in a listed unit of India’s sixth-biggest cellphone operator, as required by Indian law.

DoCoMo was committed to the management of Tata Teleservices and saw it as a long-term investment, president Ryuji Yamada said in Tokyo.

Ahead of the announcement, shares in the unit, Tata Teleservices (Maharashtra), closed up 7,6% in a Mumbai market that fell 3,1%, while shares in DoCoMo ended up 1,3% in a Tokyo market down more than 1%.

DoCoMo did not rule out the possibility of taking a majority stake in Tata Tele in the future.

Shinji Moriyuki, a telecoms analyst at Mitsubishi UFJ Securities, said DoCoMo’s recent acquisitions in Asia would be positive, especially with the company’s extensive knowledge of third-generation (3G) network services to which many developing countries are now moving.

India is the world’s second-biggest mobile market, trailing only China. More than 10-million users signed up in September, taking the total customer base to 315,3-million, more than the population of the US, and almost three times the size of Japan’s market of 109-million subscribers.

Researcher Gartner forecasts India’s cellphone user base will more than double to 737-million by 2012, as just more than a quarter of India’s 1,1-billion population own cellphones compared with about 85% in Japan.

DoCoMo will face tough competition, though, as foreign firms such as Telenor, Etisalat and Sistema are gearing up to start services in India, where home-grown Bharti Airtel and Reliance Communications dominate along with a Vodafone unit.

Carriers in India at the moment provide only 2G services. A global auction of radio waves for 3G and 4G wireless services, which provide more advanced mobile services including video, is due in January.

The DoCoMo deal comes a day after Japanese chemical maker Mitsubishi Rayon announced a $1,6bn acquisition of British rival Lucite International. Earlier this year, drug maker Daiichi Sankyo forged a $4,6bn deal for a controlling stake in India’s Ranbaxy.

DoCoMo spent nearly ¥1,9-trillion in the late 1990s and early 2000s on small stakes in operators around the world to promote use of its i-mode mobile internet technology and ensure the adoption of 3G networks on the same wideband code division multiple access standard it uses. But it saw its investments sour, and pulled out of AT&T Wireless Services , Dutch operator KPN Mobile and Hutchison 3G UK Holdings after incurring heavy losses.

The Tata Group, which splashed out an Indian record of $13bn for steel maker Corus last year and this year bought Jaguar and Land Rover for $2,3bn, has put further acquisitions on hold due to the credit crunch.

“Some of our companies with substantial foreign operations, or those which have made substantial acquisitions, are facing major problems in raising capital and establishing lines of credit for their operations,” chairman Ratan Tata said .

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PUBLISHED BY ‘BUSINESS DAY’ (South Africa)

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