Business - DoCoMo to buy 25% of Tata Teleservices

Japanese telecom giant NTT DoCoMo is in advanced stages of talks to buy about 25 per cent of Tata Teleservices, the second largest CDMA mobile service provider in India with 28 million subscribers.
The size of the deal is pegged at $1.5 billion (about Rs 6,700 crore), translating into a $6-billion (Rs 26,000 crore) valuation for the company that runs networks across the country and is planning to expand into GSM mobile services in the near future.

Figures in Rs croreNews of the likely transaction first broke a few weeks ago. Investment banking sources now suggest that the deal will be announced in a fortnight, if not earlier.
When contacted, a Tata Teleservices spokesperson refused to comment, saying: “As a policy in the Tata group, we do not comment on speculative queries.”
Tata Teleservices is a loss-making company. Between 2005 and 2007, its cumulative losses stood at Rs 5,604 crore. In addition, a subsidiary company that runs the Maharashtra operations had a cumulative loss of about Rs 880 crore in the same period, according to a Tata Investment Corporation document.
India’s mobile services market has grown rapidly to over 300 million users. Many of the half a dozen networks in the country are highly profitable.
DoCoMo, Japan’s biggest mobile phone operator, is expanding its overseas presence as growth in Japan slows. It recently invested $350 million in Bangladesh’s number-three mobile phone operator, TM International (Bangladesh) Ltd.
By entering the Indian market, many years after an initial tentative foray, DoCoMo would join fellow global heavyweights Singtel and Vodafone in the world’s fastest-growing mobile phone market that adds 8-9 million users every month. Consultancy firm Gartner expects India to have 737 million mobile connections by 2012.
The Japanese company is a global leader in the third-generation, or 3G, mobile space, which is expected to commence in India in 2009. 3G networks allow faster internet downloads and multimedia applications, opening up new revenue streams for service providers.
The money that Tata Teleservices will get from the private placement of equity is likely to be used for rolling out its GSM network and also for making an entry into the 3G space. With a current market share of about 9 per cent of the entire mobile market, Tata Tele needs about Rs 8,000 crore over the next two years.
Tata Teleservices recently tied up with UK-based Virgin Mobile. Under the tie-up, Virgin markets the service.