- Partnership and Promise in India -

DOCOMO caught the mobile industry's attention in November when it announced its 26% stake in Tata Teleservices Ltd. (TTSL) worth US$2.7 billion. Even though TTSL is India's fastest-growing pan-India wireless mobile telecom operator, some wondered why DOCOMO would invest billions in a market so unlike the Japanese market during a global downturn.
The answer is that DOCOMO seized an opportunity to leverage its considerable experience for long-term growth, says Toshinari Kunieda, Senior Vice President and Managing Director of DOCOMO's Global Business Division.
"TTSL is a quality partner with a premium brand in a market that is consistently delivering huge subscriber growth. Now matched with DOCOMO's technological prowess, this is indeed an ideal marriage," he says.

Embedded Management is the Key

The new partnership includes a strategic provision for DOCOMO to take an active, direct role in TTSL's management, which will result in a synergistic relationship for mutual long-term benefit, says Kunieda.
The arrangement also includes the formation of a Business & Technology Cooperation Committee, where DOCOMO and TTSL executives will pursue collaboration in areas including roaming, handset co-development and corporate services.
This embedded management style pays dividends, says Kunieda. Over the last three years, DOCOMO has used it with great success in forming partnerships with KTF in South Korea and PLDT in the Philippines, as well as partnerships in Guam and Malaysia.
"Rather than merely buy a stake in a new company, we become deeply involved in the partner's operations and strategic decision-making, including business plans, sales and investment. We are deeply committed to TTSL's ongoing management," Kunieda notes.

Synergizing Technology & Brand Power

With a market share of about 10%, TTSL—India's youngest mobile operator—is poised to grow. Reflecting its commitment to quality, the company was rated by the Telecom Regulatory Authority of India as having the least congested network in 2008. It also has a nationwide sales network of 3,500 outlets, the industry's largest. Moreover, the Tata brand is a household name with a 140-year history and a reputation for quality and reliability.
"TTSL is keen to maintain quality, so our pairing has been a true meeting of like minds. Next year, besides rolling out a GSM network, TTSL will prepare to develop its own 3G W-CDMA network, a field in which DOCOMO boasts world-class expertise and experience. The Tata brand and DOCOMO's leading technology will create a powerfully complementary team," Kunieda says.

Potential-laden Indian Market

The Indian market is staggering by any measure: a population of 1.15 billion with just 30% mobile phone penetration, and forecasts for about 100 million new subscribers annually over the next three to four years.
"India added eight million new subscribers in August, nine million in September and more than 10 million in October. In comparison, Japan has averaged about five million net additions per year, a figure that India can duplicate in two weeks," Kunieda points out.
Equally surprising is the fact that handsets for prepaid accounts (still the norm) cost only US$20 to US$30, and they generate just US$5 to US$6 per month in average revenue per user (ARPU).
Under such conditions, can DOCOMO really achieve an attractive return on its investment over the medium to long term?
"We certainly think so," says Kunieda.
While it may be possible to sell value-added services such as music downloads and video streaming to India's urban rich, the backbone will be voice and SMS for the next three to four years. But this is exactly the segment in which DOCOMO and PLDT have formed a highly profitable partnership in the Philippine market, which bears a strong similarity to India in terms of low monthly ARPU and overwhelmingly popular prepaid accounts.
"Having succeeded in a market of $30 phones and US$5 ARPU, DOCOMO has become quite well versed in the concepts of pricing, tariffs and promotion in such markets. We will now combine this know-how with our other expertise to form a winning, long-term partnership with TTSL in the world's second-largest market," says Kunieda.

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