NTT DoCoMo to Exit India Market
In another pointer to the current woes of Indian telecom industry, Japan-based NTT DoCoMo is exiting Tata Teleservices by selling its 26.5% stake in the joint venture with the Tata Group by June 2014. The Japanese firm said that as per the JV agreement formed in 2009 between these two companies, DoCoMo can sell the shares if the joint venture fails to meet performance targets in the fiscal year ended March 31, 2014. “DoCoMo holds the right to require that its TTSL shares be acquired for 50% of the acquisition price, which amounts to 7,250 crore (or 125.4 bn yennotice1) or a fair market price, whichever is higher, in the event TTSL fails to achieve certain specified performance targets (the above-mentioned option)... by the end of the fiscal year ended March 31, 2014. DoCoMo plans to exercise the above-mentioned right in or before June 2014,” a release from the company said.
“DoCoMo expects to sell its TTSL shares in accordance with the agreement. It is uncertain how the option will be executed as DoCoMo is not able to predict how events will unfold. The effect on DoCoMo’s corporate earnings for the fiscal year ending March 31, 2015, cannot be forecasted at this time due to these uncertainties,” it said.
DoCoMo, TTSL and Tata Sons (Tata Sons), Tata Group’s holding company, concluded a shareholder agreement when DoCoMo entered into a business alliance with TTSL in March 2009.
When NTT Docomo entered into the India market, it was confident of making it big here with its cutting-edge wireless services. It invested about $2.7 bn for a 26% stake in Tata Teleservices.
But then the telecom sector met its jinx as it got caught in the muddle of 2G scam followed by cancellation of 122 licenses by the apex court.
According to industry experts, the In-
Before NTT, operators like Emirates Telecommunications Co and Bahrain Telecommunications Co, have already exited the market. Others, including Telenor and Sistema, were forced to bring down their operations due to huge losses.
dian market is not growing the way it was supposed to and DoCoMo’s technology failed to give much fillip at the same time. As a result, even after struggling for five years, NTT couldn’t see a bright future and now has decided to exit.
Before NTT, operators like Emirates Telecommunications Co and Bahrain Telecommunications Co, have already exited the market. Others, including Telenor and Sistema, were forced to bring down their operations due to huge losses.
At the same time, operators such as Loop Mobile were acquired by large companies such as Bharti Airtel and talks were also on for a possible acquisition of Tata Teleservices by Vodafone.
Media reports say that NTT DoCoMo’s decision to exit the JV may have been triggered by a stalemate in negotiations between Vodafone and Tata. However, the two sides couldn’t reach an agreement due to higher valuation of Tata Teleservices.
As it provides two different kinds of technologies, Tata Teleservices’ operating costs were higher than its rivals. Tata Teleservices posted a loss of close to $100 mn in the financial year ended March 2013.
As per some experts, the sector is slowly moving towards consolidation and going forward there will only be 6-7 healthy operators functioning in the country as smaller players will find it difficult to survive and hence larger players will be in a better position to strengthen their positions.
The India telephony market has seen a fall in revenues and average revenue per user is not moving up significantly and the only growth is through data services.
Currently, there are as many as 13 players in the mobile services segment and the market is dominated by top three players–Airtel, Vodafone and Idea .