NTT DoCoMo had walked into India at a time when most Indians were still using mobile phones for talking or texting. NTT DoCoMo’s entry, at that time when the country was on the verge of rolling out 3G services, was expected to trigger a new phase of interesting mobile applications and services.
The Japanese company, which had become a global rage with its services and data applications under the brand i-mode, was expected to share its expertise in developing consumer-friendly applications with Tata Teleservices. As the then Managing Director of TTSL Anil Sardana said, it was supposed to be a partnership between the trusted brand of Tata and the technological superiority of DoCoMo (acronym for Do Communications Over the Mobile Network).
Five years later, the story has gone sour forcing the Japanese major to exit the Indian market. The biggest reason for this exit is that NTT DoCoMo probably did not foresee the dynamics of the Indian market. Unlike the Japanese market dominated by just two players, in India there are 10-12 operators vying for the same subscriber.
In addition, there have been major regulatory hurdles related to spectrum allocation and pricing compared to a stable regulatory regime in Japan. But most importantly, Indian telecom runs on a low-cost business model. While NTT DoCoMo gets average revenue of $40 per user in Japan, Indian operators work on wafer thin margins with average revenues not more than ₹150 a month. “NTT DoCoMo's expertise is in the top end of the market, 3G & data services but it did not do much here because ARPUs are very low in India,” says Mathias. Over the last five years, there have been a number of instances which indicate that DoCoMo did not grasp the dynamics of the Indian market.
In 2010, Mutsuo Yamamoto, Executive Director, Head of Strategic Investment and Alliance, Global Business Division of the Japanese firm, told Business Line that it was looking at the possibility of setting up an application development facility in India to cater to offer locally-relevant third generation (3G) services to subscribers. There was also a plan to work with Japanese device manufacturers assisted to debut them in India.
While this model of building applications in-house and selling customised handsets has worked well for the company at its home turf, these plans did not take off in India. That’s because the Indian players such Bharti Airtel has succeeded on an outsourced model wherein everything from network to applications is done by third parties.
Business model “India is market for long-term investors and whoever is committed to understand the dynamics. Business models that work in developed countries won’t work here,” says Hemant Joshi, Partner, Deloitte Haskins & Sells.