Telecommunication Industry: (TATA Docmo)

JV between Tata Teleservices limited (TTSL) and NTT DoCoMo was founded in November 2008, with 74% holdings with TTSL and 24% with NTT DoCoMo. It is headquartered in New Delhi, India and operates telecom services in 11 circles across India.

Telecom sector in 2008:

Telecom sector in India has always been lucrative. In 2007, the growth in total telecom subscribers was around staggering 45.3% (year on year), with total telecom subscription increased to 300.5 million in 2007-08 up from 206 million in 2006-07. With an average increase of 9 million customers every month, the penetration of telephone in India was 33%. A vast rural market was still untapped by the end of 2008, which had very less cost effective service provider to cater the subscriber. Some of major players in the industry during 2007-08 were, Vodafone Essar, Bharti Airtel, BSNL, Reliance telecom, Idea cellular, TTSL, Loop mobiles, Aircel, MTNL. By, 2008, the total share of CDMA in the market was 23% which remained stagnant since, 2005. This was a clear indication of losing popularity in CDMA market. Major CDMA player, like Reliance telecom and TTSL, hence, decided to enter into GSM market. In 2008, a report by Ernst and Young, said that India will have a rural subscription base of 200 million by 2012, comprising of around 25% of total telecom subscribers, and growing at a rate of 60% annually. Along with this, the global Mobile Value Added Services (MVAS) was growing rapidly, and India was no exception. With $1.15 billion in revenues in 2008, the Indian MVAS market was responsible for 10% of total revenues, and was pegged to grow at 70 % to reach $2 billion by 2009. Hence, by 2008, most of Indian companies faced a saturated urban and metro market with subscription percentage as high as 120% in cities like Delhi, Mumbai,

etc. Hence, two most viable and potential options which lay were either go with differentiation strategy new MVAS and better connectivity, or else, target the price sensitive semi urban and rural markets with low cost service. Some, of the major players like Bharti airtel, Vodafone-essar, Idea tried to differentiate themselves by launching innovative MVAS like caller tune services, missed call notification services, entertainment on the go, etc. While others like Videocon, Uninor, etc., tried go for the low cost strategy. With advent of smart phones in 2008, the next big thing in the market was supposed to be data connectivity. Companies focused on luring urban users to go online and subscribe data connection, as well.

Overview: Tata Teleservices Ltd.

Founded in 1996, TTSLs main objective is to provide end-to-end telecommunications solutions for business and residential customers across the nation and internationally. It is one of the four major companies in the Tata group in telecom sector. The other three being Tata communications, Tata teleservices (Maharashtra) ltd., and Tata sky. Prior to 2002, TTSL provided basic telephony services in major cities of Karnataka, tamil nadu, delhi, and Gujarat. The company started to grow after acquisition of 51% stakes in hughes telecom (india) ltd. and entering into the much booming Maharashtra market and especially Mumbai, in 2002. This saw a huge rise in customer base at TTSL, and so in 2005, the company launched its mobile telephony service under the name Tata Indicom. Tata Indicom started providing service with CDMA technology, with only Reliance being other major CDMA player. All other major telecom players like Bharti, Idea, Hutchison-essar and BSNL were into GSM market. Tata Indicom became operational in 22 circles across India by 2006-07, and the company growing at a steady pace with main strategy of overall low cost. With a price war like situation arising in Indian telecom market in 2008-09, Tata Indicom came up with many low cost offers like unlimited validity and per second pulse rate to increase its market share. However, between 2005 and 2009, Indian telecom market saw a continuing reduction in share of fixed lines in total subscription, with a similar increase in GSM connection. The share of CDMA in total subscription base remained mostly constant throughout 2005-09, at roughly around 20-24%. This posed a huge threat to CDMA focused service providers like Reliance Comm and Tata Indicom. As a result both Reliance and Tata Indicom decided to enter the GSM market.

TTSL also did a JV with virgin mobiles, mainly to target the growing youth and urban population of India. Virgin mobile too, like Tata Indicom went for a low cost strategy in CDMA market and GSM market. However, the company failed to impact the Indian market much. In 2009, TTSL had 6th rank in Indian telecom markets, pegged behind Bharti with 97 million subscribers, Anil Ambanis RCom with 74 million, Vodafone with 67 million, the public sector Bharat Sanchar Nigam Ltd (BSNL)with 82 million and Idea Cellular (of the Aditya Birla group) 43 million. TTSL brought up the rear with 36 million. Hence, it decided to move into full scale operations in GSM market with a JV with NTT DoCoMo.

Overview: NTT DoCoMo

Founded in 1991, NTT Docomo, Inc. is the predominant mobile phone operator in Japan. It headquarters in the Sanno Park Tower, Nagatach, Chiyoda, Tokyo. Docomo was spun off from Nippon Telegraph and Telephone (NTT) in August 1991 to take over the mobile cellular operations from the parent company. In march 2008, NTT Docomo had more than 50% market share in Japans cellular market. The company has a wide range of MVAS under its offerings, and is also credited with the invention of W-CDMA technology (which was widely used by TTSL), and FOMA (internet technology for W-CDMA subcribers). NTT Docmo has wholly-owned subsidiary in Europe and North America.