In 1997, NTT bought 35 per cent of a badly managed government phone company called SLT along with the right to manage it for five years for USD 225 million. The decision was bracketed by the Central Bank attack (on a per capita basis more devastating than the World Trade Center hit of 11 September 2001) and the bombing of an empty [Sri Lankan] World Trade Center. Many wondered what the logic was. One explanation was that NTT saw Sri Lanka as a stepping stone to India. But no step was taken.
Others saw it as the only sensible foreign investment made by NTT, a high-cost operator that was completely unaccustomed to the challenger role, but was the quintessential incumbent. Their culture meshed perfectly with the monopoly culture at SLT. In contrast to the losses incurred in Thailand and Indonesia, they did well in Sri Lanka, in the process turning SLT into some kind of modern organization, even if they could not make it efficient.
Now the Economist talks of the return of the Japanese. No stepping stone, now. Directly to India.
HERE we go again. When NTT DoCoMo, Japan’s dominant mobile operator, last ventured abroad, the results were painful. Between 1999 and 2001 it spent almost ¥2.2 trillion (about $20 billion) buying minority stakes in a handful of mobile operators around the world. But it ended up booking a loss of half the value of these investments in 2002 and scuttled home. In the past couple of years, however, DoCoMo has been buying stakes in foreign operators once again, with investments in South Korea, the Philippines, Malaysia and Bangladesh. Its latest move: India.
On November 12th DoCoMo said it would pay $2.7 billion for a 26% stake in Tata Teleservices, the mobile-telecoms arm of the Tata Group, one of India’s biggest conglomerates. The price, valuing the privately held Indian business at $10.4 billion, is steep: the operator is India’s sixth-largest, with barely 30m customers in a crowded market that boasts more than 300m. The company is believed to be unprofitable and is about to begin a costly network upgrade.
Pity the Economist missed the Sri Lanka experience of NTT.
1 Comment
Abu Saeed Khan
Former ITU head, Yoshio Utsumi, is now an adviser in Toyota. He lectured in an international regulatory conference at Pataya (Thailand) early this year. There he lamented that the Japanese telecoms industry has done a “big mistake” by not joining the GSM club.
Unlike its legendary automobile and electronics peers – the Japanese telecoms vendor and operators are dwarfs in the global arena. The Koreans have (Samsung and LG) have solidified their position in the handset market. The Chinese (Huawei and ZTE) are equally strong in handset and network gears.
The Japanese are simply paying the price of their obsession for homegrown standards and business models in telecoms.