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Oct. 26 (Bloomberg) -- NTT DoCoMo Inc., Japan’s biggest mobile-phone operator, said its partner Tata Teleservices Ltd. in India may take part in consolidation in the world’s second- largest wireless market.
“If you look at the positioning of Tata Teleservices, it is possible that they can be part of this consolidation,” Masatoshi Suzuki, a DoCoMo senior executive vice president in charge of overseas strategy, said in an interview in Geneva yesterday. “We need to look at the possibility of growth as well as at the regulatory environment.”
DoCoMo has invested 260 billion yen ($3.4 billion) in Tata Teleservices, India’s No. 6 operator, since 2009 to get a slice of a market where there are 70 mobile connections for every 100 people. India is the only major nation other than China that Tokyo-based DoCoMo considers a growth market, Suzuki said. The country has 14 active operators and buying competitors may create “a lot of losses” for the purchaser because it would have to return wireless frequencies to regulators, he said.
India restricts the amount of spectrum a company holds to 15 megahertz for a so-called circle in some regions and 12.4 megahertz in other parts, according to the Department of Telecommunications. India has 22 telecommunication zones, or circles. Each circle needs to have a minimum three carriers and the combined market share of a merged entity is limited to 40 percent. A phone service operator can’t own more than 10 percent of another carrier that operates in the same circle.
“The larger regulatory framework has the impulse to encourage competition,” Suzuki said. “With the current framework I don’t think we’ll see a large-scale consolidation.”
India this month said it plans to make more spectrum available to mobile-phone operators, permit sharing and trading of airwaves and aid mergers so that handsets can reach every villager. Airwaves held by some government departments, companies and telecommunications operators may be freed up, Kapil Sibal, India’s telecommunications minister, said Oct. 10.
Bharti Airtel Ltd., India’s largest mobile-phone carrier, said last year its plans to offer nationwide high-speed services were thwarted after a “severe spectrum shortage” drove up prices at an auction for third-generation airwaves. Nine of India’s 15 mobile-phone service providers have 3G spectrum, with Bharti owning permits for 13 of the nation’s 22 telecommunications zones and Vodafone Group Plc holding nine.
Vodafone, the world’s biggest mobile-phone company, this year increased its stake in its Indian venture with Essar Group as the British operator aims to tap fast-growing markets to make up for sluggish growth in Europe.
DoCoMo plans to keep its 26 percent stake in Tata Teleservices stable, Suzuki said, adding that it usually takes about four to five years for an Indian wireless company to become profitable. He declined to comment on Tata Teleservices’s profitability.
Rajeev Narayan, a spokesman for Tata Teleservices, didn’t immediately respond to an e-mail seeking comment.
Competition among the 15 mobile-phone service providers pushed call charges to less than one U.S. cent a minute, eroding profitability at the carriers.
The wireless market in India, Asia’s third-biggest economy, is forecast by research firm Gartner Inc. to exceed 872 million active users by the end of 2014, compared with 601.7 million at the end of July.
DoCoMo is also in talks with international phone-service providers for bringing handsets it has helped develop to overseas markets. In September, the company announced a deal with France Telecom SA to bring Sharp Corp.’s “Aquos” smartphone to France. Such cooperation deals help lower DoCoMo’s procurement costs while expanding the reach of services and functions it has developed, Suzuki said.
The company is also maintaining a strategy of investing in software developers and distributors outside of Japan and closing partnerships in order to tailor applications and other services to local markets, he said.
In August, the company acquired a 25 percent stake in Vietnamese online music and TV provider VMG Media JSC for 1.4 billion yen. The following month, it invested an additional 28.4 million euros ($40 million) in Germany’s net mobile AG, in which it bought a majority stake in 2009, to expand electronic payment services. DoCoMo also agreed with China’s biggest search engine operator, Baidu Inc., to set up a venture to make games and other mobile-phone content.
--With assistance from Yoshinori Eki in Tokyo. Editors: Simon Thiel, Kenneth Wong
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