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Follow UsNEW DELHI, INDIA: The latest deal, where NTT DoCoMo Inc., Japan’s largest mobile telecommunication service provider, picked 26 percent stake in Tata Teleservices Ltd for $2.7 billion, exposes the India entry potential for global mobile telecom service providers who do not have on their radar an India entry strategy yet.
Such service providers are missing out on opportunities in a country where incumbent mobile telecommunication service providers collectively add more than nine million subscribers a month and are projected to have overall mobile services revenues of more than $37 billion by 2012 growing at a CAGR of 18 percent, according to estimates.
The string of investments in Indian telecom companies, like that of Tata Teleservices by NTT DoCoMo, Inc., Unitech Telecom by Norwegian telecom firm Telenor ASA, world’s seventh largest telecom service provider at $1.36 billion; and Swan Telecom, a start-up GSM telecom service company of a Mumbai-based real estate developer Dynamix Balwas Group by Dubai-based Emirates Telecommunications Corp (Etisalat) at $900 million; or, South Africa’s largest telecom company MTN Group’s attempts to enter the Indian market – are an indication of the fact that there is ample room in this this market, at least inorganically.
Bundeep Singh Rangar, chairman, IndusView Advisors Ltd, said: "NTT DoCoMo's investments in Tata Teleservices and the start-up operations of Swan Telecom by Etisalat and Telenor ASA’s in Unitech Telecom expose the potential for inorganic activity in a market that is otherwise considered to be crowded but has a tele-density of less than 30 percent, signifying the expected growth potential in the sector.”
The Tata Teleservices deal will accelerate the telecommunication sector deal activity to $5.8 billion from about $3.1 billion in the deal street that grossed more than $28 billion this year in October.
Opportunities Exist
Other international telecom service providers seeking an India entry include Kuwait-based Zain Group, Qatar Telecom, Bahrain Telecom, Italy-based Telecom Italia SpA and South Africa’s MTN Group.
However, some of the global mobile telecom service providers such as Telefonica SA of Spain, French mobile telecommunication services provider, France Telecom and Deutsche Telekom AG of Germany are among those missing out on the opportunity to tap the growing mobile subscriber base expected to reach more than 700 million by 2012 from the current 300 million, at a CAGR of 21 percent.
Such growth trends bring with it corresponding increase in investments as government estimates suggest that the overall telecommunication sector will need $73 billion over the next five years to achieve a tele-density of up to 45 percent. And, a major chunk of the investment is expected to be realised through foreign direct investment (FDI), particularly in the area of mobile communication.
It becomes significant as the government has granted new licenses and spectrum to aspiring operators such as Datacom Solutions a subsidiary of one of India’s leading consumer durables company Videocon Industries Ltd; Loop Telecom, a BPL Mobile Communications group company; S Tel Ltd, joint venture between Skycity Foundations and Telecom Investments (Mauritius) Ltd; among others which are likely targets – but within the regulatory purview of the overseas entity’s stake in the domestic company not to exceed 74 percent.
“MTN Group, South Africa’s largest mobile service provider with operations in 21 countries is another service provider waiting in the pit-lane to move in to India after its two earlier attepts with leading Indian telecom service providers Bharti Airtel Ltd on the first count, followed by Reliance Communication, which could have been the largest emerging markets telecoms merger worth more than $65 billion.” added Rangar
Other large mobile telecom deal this year included Idea Cellular Ltd acquiring 40 percent stake in Spice Communications Ltd, a regional cellular services provider for $675 million.