Unpredictable India market gives second thoughts to DoCoMo

Dec 02 2013, 08:20 IST
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SummaryStruggling with sales at home, Japan’s largest telecom operator NTT DoCoMo

Struggling with sales at home, Japan’s largest telecom operator NTT DoCoMo entered the world’s fastest growing mobile market — India — by buying a 26% stake in dual technology provider Tata Teleservices in 2008, expecting a long-term predictable growth.

It did start on an optimistic note with the Tata Group’s telecom arm launching services based on GSM technology under the brand name Tata DoCoMo and initiating a call tariff war by introducing per-second billing at 1 paisa per second, almost half the then prevailing tariffs.  

However, although the Indian telephony market grew from 300 million subscribers in 2008 to 900 million customers in 2013, Tata DoCoMo failed to accumulate momentum. On the contrary, the company, which is currently India’s sixth-largest operator by number of subscribers, has let go of more than 10 million customers since last year. The price war it had started also backfired. With new companies entering the field, the price war intensified, bringing down the average telecom rates across the industry, thereby reducing the margins of companies across the sector to unsustainable levels.

The dual technology player also got embroiled in the 2G spectrum scam when the Supreme Court, in February 2012, canceled 122 telecom licences granted to eight companies, citing fraud in the allocation of the mobile permits. Tata DoCoMo saw three of its licences canceled.

In April this year, Tata Teleservices also surrendered CDMA spectrum beyond 2.5 MHz in all circles, barring Mumbai and Delhi, to avoid paying a one-time charge of more than R1,152.7 crore. The company is struggling to pare its debt of around R23,000 crore. It even had to go for two rounds of rights issues to sustain capital expenditure.

DoCoMo, which had in 2012 planned to invest further to raise its stake in Tata Teleservices, has been forced to hold back. The Japanese partner seems to have learned its lesson the hard way — that growth in India is not always predictable or easy.

Faced with an oversaturated, ultra-competitive mobile market at home, DoCoMo bought the Tata stake in 2008 for around R13,000 crore as part of a strategy to look for a long-term growth abroad by buying minority stakes in telecom operators around Asia. DoCoMo, which has investments in 17 companies overseas, including eight telecom firms around Asia, is currently hunting for new overseas investments in the areas of mobile content and applications. DoCoMo holds a 24% stake in Hong Kong’s Hutchison Telecom, 5.9%

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