Back in Japan, DoCoMo is facing an onslaught on its core revenues, as stagnant mobile-phone sales and nimbler competitors have forced the company to drop its earnings guidance. On Oct. 31 the company warned that revenues and net income for the full fiscal year through next March would likely be lower than previously predicted in July.
The company had originally forecast $48.7 billion in revenues, a 1.2% rise over last year's sum, and net income of $5.13 billion, a 2.4% gain. Now it expects $46.9 billion in revenues, down 2.4% from last year, and net income of $5 billion, up 0.8%. It kept the operating profit prediction"”$8.47 billion, up 2.7% from the previous year"”unchanged.
Emerging market interest
In 2006, DoCoMo officially started hunting for foreign acquisitions, even though its previous overseas forays had gone sour, resulting in as much as $15 billion in write-offs from one single investment in the 3G spectrum in Britain. In June, DoCoMo singled out emerging markets such as Bangladesh, Vietnam, Cambodia, Laos, and China as strategic battlegrounds. On June 16 it announced a $350 million deal to purchase 30% of TM International in Bangladesh.
The DoCoMo investment in Tata might get even larger. Because of regulatory requirements on the Indian side, DoCoMo will also co-float an open offer for at least 20% of the shares outstanding for a subsidiary, Tata Teleservices Maharashtra (TTML.BO), which does business in the rapidly industrializing state of Maharashtra, home to the Indian financial capital of Mumbai. At Wednesday's closing price, an offer for 20% of TTML's nearly 1.9 billion outstanding shares could cost more than $140 million, assuming the open offer does not include a premium.
If the open offer for the Maharashtrian subsidiary goes well"”it is unclear what kind of premium Tata Sons and DoCoMo would offer"”the two companies would face competition from both ends. Much larger players such as Bharti Airtel and Reliance Communications are keen to poach subscribers from smaller companies like Tata, but with an upcoming, multibillion-dollar 3G spectrum auction, and new licenses being handed out to foreign players, deep-pocketed new entrants will be making splashy entrances.
Srivastava reports for BusinessWeek from New Delhi. Hall is BusinessWeek's technology correspondent in Tokyo.
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