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Tata Teleservices stake sale to DoCoMo and the future of Indian telecom

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2005032100540101 Tata Teleservices has sold a stake of 26% to Japan’s NTT DoCoMo. The deal value is $2.7 bn. Tata Tele has 30 million CDMA subscribers and is rolling out its GSM services. Some say the deal is over-valued and some say its not easy to put value on the fastest growing mobile market in the world. India is the fastest growing market second only to China. It adds 10mn subscribers every month. The current subscriber base stands at 300+million and is expected to be 700 million in 2012. That is almost double to today’s numbers.

We have 9 players (Airtel, Reliance, Vodafone, BSNL, Idea, Spice, BPL, Aircel, MTNL) in the circuit. 6 more players are ready to join the market. What this means is India will be having 15 players operating by 2010. If 9 players have fought for 300 million subscribers, then its 15 players fighting for 400 million subscribers. This would mean heavy competition and severe cost-cutting. Though, this is good for the subscriber the companies operating would face serious challenges. Network roll-out and gaining subscribers are the biggest challenges.

New entrants cannot roll their networks as aggressively as the big boys. For example Reliance after acquiring its GSM license has rolled out its network very aggressively and ready to eat some of the Airtel’s GSM pie. It has built 1600 towers  by spending 300 crores. It added 1.76 million subscribers and some of them might be GSM subscribers. Now, does the new operators have this kind of cash to roll out a network? I guess not.

Without even rolling out a network, let alone having a subscriber Unitech sold 60% stake to Telenor. Which means it either does not have the money or the technology to roll out services. Swan telecom and Shyam Telelink have followed the similar route. What this means is, consolidation is already happening in the form of stake sales. The next wave is mergers and acquisitions.

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Airtel and Reliance had bid unsuccessfully for South Africa’s MTN. This does not mean that they have stopped looking. They will look for acquisitions. Be it local or global. They do realize that India is still unfinished business.

If Indian telecom is a movie, what we have seen is the first half. New GSM licenses and 3G auction is the interval. Second half is left and promises to be interesting.

It is not the matter of ‘if’, but ‘when’ and ‘who’.

  1. Ayub Khan says

    most trustable brand TATA.

  2. anamika says

    hav anyone noticed the saving wall in docomo website..knw hw much you r spending on your current mobile n hw much you cn save wit tata docomo.. i saved 5000 rs..

  3. Anamika says

    I have one things to say,these telecom service provider 1st attract customers and then warm up their rates slowly..then finally the rates for all servises looks the same with a minute difference….D0C0M0 has lovely attracting features,hopfully they don’t do the same!!

  4. ashish says

    i agree…tata docomo with their attractive tariffs package (tatadocomo.com/prepaid-plan-details.aspx)…is sure to attract the new consumers (college kids) and put the other millions into a dillemma (whether to switch or not to switch to tata docomo!)….pretty exciting times ahead!

  5. Ankit says

    Telecom sector has sure picked up in the recent times.First telenor and now docomo,We sure are well placed for the interval:-)
    Hope the second half as exciting

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