Tata Tele- Docomo
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Transcript of Tata Tele- Docomo
Tata Tele-Docomo
INDUSTRY OVERVIEW IN INDIA
• India -2nd largest in telephone users
• Growth of over 14 million subscribers per month
• Number of telephone subscribers- 933 million
• 3rd largest internet user-base
• Second most populous country in the world good future prospects
TRAI1997
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2G 3G
MARKET SHARE
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Series 1
Tata Communications-Company Overview• Leading global provider of a new world of
communications
• Tata Global Network
– largest submarine cable networks
– Tier-1 IP network
– connectivity to more than 200 countries
– nearly 1 million square feet of data centre and collocation space worldwide
– Tata Communications Lanka Limited
– Neo-tel(South Africa)
NTT Docomo- Company Overview• Japan's premier provider of leading-edge mobile
voice
• More than 55 million customers in Japan
• In 1999, Docomo launched i-mode - platform for mobile Internet services like e-mail, browsing, downloading
• In 2001, launched FOMA, world's first 3G commercial mobile service based on W-CDMA
• Also launched Osaifu-Keitai, a mobile wallet platform enabling quick, contact-less transactions for cash, credit, ID
• Uses the power of mobile communications to enable customers to enrich their lives
TATA TELECOM SERVICES
• TATA DOCOMO (1sec : 1paisa)
• 2008- NTT DOCOMO with 26% stake in Tata Docomo subsidiary of Tata teleservices
• In association with Virgin and T24
• Broad band – Tata photon
• NTT Docomo decided in April 2014 to sell their 26% stake due to losses
Deal Overview
• TTSL valued at- $10.38 billion
• Deal Worth- $2.7 billion
• NTT Docomo acquires 26% stake in TTSL
• 20% fresh issue of shares
• 6% existing- Tata Sons, Tata Steel, Tata Communication, TTML
– 12.12% stake in Tata Teleservices Maharashtra Ltd (TTML) for $112 million
– 1% in Tata Communications for $ 70 million
Deal Overview(continued)
• TTSL- unlisted company
– Long term capital gains tax at 20%
– Shares held for less than 1 year taxed at 10%
• Timeline
– November, 2008- Capital Alliance Agreement Announced
– March 2009- Transaction of 26% shares completed
• 3 DOCOMO Directors joined TTSL board
Synergy
• For NTT
– Global Expansion
– India- very big market
• For TTSL
– DOCOMO-strong market leader
– provide know-how to help the company develop its mobile
business
– development and delivery of value-added services, where
DOCOMO is a firmly established market leader
– Bring experience in serving customers with high speed
data offerings(3G)
– Expand to GSM based network
I-Banks/PE Involved
• TTSL- Lazard and Co
• NTT Docomo- JP Morgan
Deal Analysis
• Valuation of the company at over $8bn
• Docomo paid three times more for the 26% stakes.
• Expectations:
• NTT Docomo:
– Entering the showpiece segment of the fastest growing economy
– 3G service licensing in January, 2010
ROCENet Profit Margin ROE EPS OPM
Pre-acquisition 7.33 9.55 11.14 0.89 16.2
Post-acquisition 7.44 10.61 10.97 1.11 18.7
Change(%) 1.5 11.1 -1.53 24.72 15.43
Ration Analysis
• Income increases post acquisition• Slightly more debt than equity• EPSvery profitable for investors• Company profit margin is very fairly profitable
Positives and Negatives of Deal• Positives for TTSL:
– To curb Debt (22,000cr apart from interest rates)
– Revived operations that were shut in different services
– Harness 3G technology with Docomo technological expertise
• Strategy Failed:
– Failed to accumulate momentum: 6th largest operator by no. of subscribers.
– Cancellation of licenses in Feb, 2012: Tata Teleservices to go for two rounds of rights issues to sustain capital expenditure
– NTT Docomo looking for exit options.
Our Opinion
• Indian Market- dominated by GSM
• Deal a failure
– Market dominated by Bharti Airtel, Vodafone
– Margin-denting price war
– Japan and India- very different cultures
• Spent 6000 crore to buy 3G spectrum
– overburdened with debt
– Little funds left to expand 3G
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