Japan Dials Into India’s Telecom Market
Nov. 18 – Japanese telecom giant NTT DoCoMo acquired a 26 percent stake Tata Teleservices (TTSL) for about Rs 13,070 crore (US$2.7 billion) or an enterprise value of Rs 50,269 crore ($10.38 billion) last week. TTSL has 25 million subscribers spread across 20 telecom circles in India, commanding 9.3 percent marketshare and is the county's sixth largest telecom player. NTT DoCoMo also confirmed that the company will have the right to appoint three directors in the TTSL board.
The deal comes ahead of India's auction of 3G spectrum, a technology of which that DoCoMo has extensive experience.
The Business Standard reported that DoCoMo will pick up the equity through a combination of fresh issuance of equity (20 per cent will be through this route) and acquisition of shares from the existing promoters. In addition, DoCoMo, in accordance with regulations of the Securities and Exchange Board of India, will make an open offer to acquire up to 20 per cent of outstanding equity shares of Tata Teleservices (Maharashtra) (TTML), in which TTSL has a 37 percent stake, through a joint tender offer along with Tata Sons.
Tata Sons, the main holding firm of the group, holds a 45% stake in the unlisted TTSL, while Tata Communications holds 15 percent, Singapore's Temasek owns about 10 percent of the firm, while investor C. Sivasankaran holds 8 percent.
Tata Tele provides services on the CDMA platform, and is launching services on the more popular GSM platform from January. India is the world's second-biggest mobile market, and the fastest growing. According to Reuters, more than 10 million users signed up in September, taking total subscribers to 315.3 million, of which 233.7 million were on the GSM platform.
Experts told the Business Standard that the deal makes strategic sense for both. Telecom analyst Mahesh Uppal said: “DoCoMo brings in significant technology and service experience in 3G, which they have pioneered in the world and puts TTSL in a different league. For DoCoMo, it marks their entry into one of the fastest growing telecom markets and they have got it at a very attractive price when compared to the high valuations of new telcos which do not have any infrastructure or subscriber base”.