ENTRY AND EXIT OF FDI: A CASE OF DOCOMO

Foreign Direct Investment (FDI) is an important aspect for a growing economy like India. Our nation has allowed FDI in different sectors like multi-brand retail, single brand retail, telecom, insurance, media, defence and so on. Presence of a foreign investor not only adds quality but also some glamour to the sector. The entry of foreign investors gives confidence to a country that it is investment friendly and their exit equally gives pain. The appearance of fault line in TATA DOCOMO resulting in TATA and NTT DOCOMO is a case in point.

TATA DOCOMO (TD) created a new trend of 1paisa (ps) per second, when it made a foray into the Indian telecom sector. Prior to the entry of Tata Docomo, other mobile service providers were offering a minute’s pulse rate. Whether a person spoke for 15 seconds or 1 minute 2 seconds, he had to pay the price for 1 minute and 2 minutes respectively. During that period, Tata Docomo’s offer asking customers to pay for what they use was a new thing for Indian telecom industry and was expected to create a boom! Some long talkers soon realised that they will end up paying more if they choose this service as already established service providers like Airtel, Idea, BSNL and Vodafone were providing 50ps/minute call rate. However, it was very useful for those who made many short duration calls!

But then change in the number was a problem for many at that point of time as Mobile Number Portability (MNP) option did not exist. This prevented many from shifting completely to TD and some people used it as an alternative number. The entry of dual sim phones in the Indian mobile market was a boon for such people. Unfortunately, for TD, the competitors never lagged behind in providing 1ps/second offers. In fact, service provider like Airtel which had very good penetration, a large customer base and was appreciated by customers for its signal strength provided an option for them to choose between minute pulse and second pulse. So long talkers continued their existing plans and short talkers changed their plans and not the service provider. This prohibited many customers from buying new TD sims which had limited network coverage and had only second pulse rate option and not minute pulse rate. To tackle this, TD introduced other offers like 1ps/2seconds, 3ps/4seconds and so on. But bringing similar offers was not a big deal for the competitors! Rather, it helped them in diversifying tariff plans. Due to poor network connectivity, other Value Added Services (VAS) of TD didn’t help in attracting more customers.

Later, it was the turn of ‘cost of sim’ game! At a time when customers had to pay an amount nearly Rs. 100 to obtain a new sim, TD started providing sims at as cheap as Rs. 2! For students like me, it was like buying chocolates! The expenditure to get our photo and ID cards was more than the cost of buying a sim! With such an offer, a single customer bought 5 to 6 sims at a time. I am no different. I too had bought four sims of TD at a cost of Rs. 8! To make the offer more interesting, the company had also provided a talktime of Rs. 40 in each of those sims! I myself didn’t know what to do with so many sims! But I purchased them. I and most of the customers like me thought that the one who bought maximum sims was more intelligent in grabbing such offers! There was an upper limit of eight sims in a person’s name! Otherwise, many people including me would have purchased 25 to 30 or even 50 sims! I used to call my parents everyday from different sims in order to keep them activated.

To be realistic, it was a dirty bomb by Tata Docomo! In fact, TD itself couldn’t keep a hold on mad rush for its sims! (rather ‘sins’). May be, the company was initially happy for its wittiness to increase its consumer base. But it turned to be a pseudo-consumer base! Sooner than later, the customers started getting call from the company to verify their ID proofs. The company had failed to manage the documents and it had ended up in a mess. Many customers had to re-submit their documents! This irked the consumers! Visiting a photocopy shop, again to get copies of photograph and then go to the simcard dealer, fill up the form and submit was really a tedious process. So people like me, who had bought sims only to ‘utilize’ the offer thought of finishing the talktime available in each of the sims and keep them somewhere safe so that they can be used for contact transfer when we change the phone!

In a way, the idea of increasing customer base had landed in a disaster! The reliability of quality of product for which TATA is popular for couldn’t really keep its stature in this game! Though at that point of time I didn’t think so much, but now when I think about it I feel, probably this low cost sim scheme might have been a boon for terrorists or anti-nationals. Even otherwise, they possess so many sims with them, and if it is available at a toffee rate, will they not utilize it!? Aren’t they ‘intelligent’!?

On a broader perspective, the entry of NTT Docomo, which is one of the best mobile operators in the World, was a very positive sign for India. As the TD website says, NTT Docomo provided cutting edge technology. Technologists at DOCOMO have defined industry benchmarks like 3G technology, as also products and services like i-Mode, e-wallet and a plethora of lifestyle-enhancing applications. Last year itself, while most of the rest of the industry were only beginning to talk of 4G technology and its possible applications, DOCOMO had already concluded conducting 4G trials in physical geographies, not just inside laboratories!

The investment by NTT Docomo was one of the biggest Foreign Direct Investments (FDI) in India. It had not only brought the much needed dollars to the country but also technology and human resource. Despite this, the company incurred losses in India and has finally decided to sell its shares and exit. But this exit will mark a black spot for Indian economy. If such a technologically advanced company fails to make profit in a country like India which has seen drastic increase in the number of households having cellphones from 7 per cent in 2004 to 82 per cent in 2011 – 12, then the possibility of other FDIs coming into country also becomes dismal. Not only in FDI terms, but also in terms of bilateral relations, Tata – Docomo partnership had helped in enhancing India – Japan relations.
If this partnership had become successful, then it would have attracted many more Japanese firms to invest in India. Now it was the right time for India to grab maximum investments from Japan under the regime of a pro-Indian Prime Minister, Mr. Shinzo Abe. Our neighbour China, though not in good terms with Japan due to Senkaku island issue, has presence of 10 times more number of Japanese companies than what India has. So, India should consider the exit of NTT Docomo seriously and address the issues to make the nation more investment friendly. Indian companies should devise right strategies to make collaborations successful.