DoCoMo Bids TATA Teleservices Adieu: Exit that has Repercussions for the Indian Telecommunications Industry

DoCoMo Bids TATA Teleservices Adieu: Exit that has Repercussions for the Indian Telecommunications Industry

The Indian telecommunications industry is facing a massive failure when it comes to factors such as regulatory uncertainty and cut-throat tariff competition. The end result is that DoCoMo has just hung up on TATA Teleservices Limited. As Japan’s largest mobile operator, NTT DoCoMO had been a feather in the cap for the TATA Group. It partnered TATA Teleservices for about 5 years. When it recently offloaded its entire stake at a value that is half of the original acquisition price of $2.6 billion, it heralded the ringing of alarm bells for the Indian telecommunications industry.

Japanese companies are abandoning ship when it comes to India. Just a few weeks ago, Daiichi Sankyo sold its stake in Ranbaxy Laboratories to Mumbai based pharmaceuticals group Sun Pharma. Just what is behind this mass exodus? It could be the slowdown in economic growth and the political uncertainty clouding India’s future. When DoCoMo acquired a stake of 26.5% in Tata Teleservices, it was seeking to set cash registers ringing and galvanise the telecom industry. But when billions of dollars in losses and regulatory uncertainty were the problems confronting it, DoCoMo preferred to say “ta-ta” rather than TATA.

In what could be damaging repercussion for the TATA group, a big question mark hangs over TATA Teleservices and its future. When the 2009 joint venture agreement had been framed between the two companies, DoCoMo had provided two options. The first had been to increase the stake to 51% in 2 phases by the month of March. The second was to sell the stake at half of the acquisition price or a fair market rate. When the joint venture failed to attain profit targets, DoCoMo chose to disconnect rather than stand back and join in the downward spiral.

Another major deterrent for DoCoMo could have been the success of telecom giants such as Bharti Airtel and Vodafone. Excellent growth prospects can be anticipated and prophesized. Unfortunately, reality may impinge and force companies such as DoCoMo to realize that they have dialled the wrong number. India still has a long way to go when it comes to even growth and development. Whether any current political leader has the potential to unleash the growth is a reason why foreign companies are holding back or even opting out.

When it comes to business, money is the motivator and profits fuel the industry. The success of any company depends upon its ability to assess what the future can bring and anticipate future trends. Perhaps the agreement had been framed keeping in mind a certain political and economic environment. Unfortunately, no one can be 100% accurate when it comes to questions such as attainment of performance targets. But a general attempt to prepare for all eventualities while framing agreements is a must or losses like these will become commonplace in the Indian industry.

Unfortunately, the telecommunications industry is also suffering from lacunae such as delay in introduction of 3G, telecom license cancellations and corruption scandals of all proportions and sizes. Corruption is a major deterrent for effective business. After all, bribery cannot boost profit margins. If anything, it is counterproductive in the long run.

If governments across the years fail to see what lack of action with regard to corruption can do, India will face even more misfortunes. We attained independence in 1947 but we are still struggling in 2014. One party or business is not behind the situation. It is the general atmosphere of malaise, apathy and corruption which has proved to be a lethal cocktail for India.

Perhaps many members of the Indian public are content to dial out just like DoCoMo did. But the ring tone is still on. The number can still be punched in. What is missing is the will.

Companies can only try to do honest business. But it is the government which must frame the right policies, and more importantly implement them. Unfortunately, the Indian political scene is more like a jarring cacophony than a soothing medley. What comes out of this is one more tearful adieu as TATA Teleservices bids goodbye to DoCoMo.