Unpredictable India market gives second thoughts to DoCoMo

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SummaryStruggling with sales at home, Japan’s largest telecom operator NTT DoCoMo

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% of South Korea’s KT Corp, 4.7% of Taiwan’s FarEasTone Telecommunications, and 8.6% of Philippine Long Distance Telephone.

With its India venture not turning out to be “predictably” profitable, there have been strong market rumours that DoCoMo, which has the right to sell back its shares to the Tata Group, is currently looking at exit options. Under the shareholder agreement, DoCoMo can raise stake if its Indian partner (Tata Teleservices) meets certain performance parameters.

However, the agreement also allows Tata Teleservices to mandatorily buy out the entire stake of DoCoMo in 2014 if the Japanese company is unable to find a strategic investor or the Indian partner is unable to meet certain performance parameters which include achieving a target subscriber base and subscriber additions every year and attaining minimum revenues and profits for the company in specified time-frame, among others. 

According to reports, Tata Teleservices and Russia’s Sistema JSFC are in exploratory talks for a merger in which NTT DoCoMo’s stake as well as part of the Tata Group’s holding would be transferred to Sistema.

However, despite the rumours, DoCoMo’s president Kaoru Kato, in an interview to The Wall Street Journal earlier this year, said, “we plan to hold on to our stake”. He had added “we are aware that growth may take time”.

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