NTT DoCoMo Inc, Japan's biggest mobile phone operator, will buy a stake of about 26 per cent in India's Tata Teleservices for 260 billion yen ($2.7 billion), Japanese business daily Nikkei reported on Wednesday.
A DoCoMo source said earlier it was set to announce a plan to buy a stake in India's No.6 wireless carrier later on Wednesday, a deal that would give it a foothold in the world's fastest growing cellphone market as it seeks growth outside of its mature home market.
It would also add to a record value of overseas acquisitions by Japanese firms this year as companies increasingly snap up competitors abroad, taking advantage of tumbling global stock markets and the yen's recent surge.
Company sources said in September DoCoMo was in talks to buy a stake in Tata, part of the Tata Group conglomerate and parent of Tata Teleservices (Maharashtra) Ltd.
It would be the latest of a series of overseas acquisitions by DoCoMo and follows $350 million investment in Bangladesh's No.3 cellphone carrier.
Shinji Moriyuki, a telecoms analyst at Mitsubishi UFJ Securities, said DoCoMo's recent acquisitions in Asia would be positive for the company, especially with its extensive knowledge of third-generation network services to which many developing countries are now moving.
"Many people have voiced concerns because of its overseas investment spree in the early 2000s and failures afterward, but business conditions are totally different now," Moriyuki said.
"This time, the acquisition value should not be too large because of sluggish stock markets, it can count on growth in developing markets, and both parties (DoCoMo and Tata) should be able to find synergies because of the current timing that 3G services are about to be launched."
DoCoMo spent nearly 1.9 trillion yen in the late 1990s and early 2000s to buy small stakes in operators around the world to promote use of its i-mode mobile Internet technology and ensure the adoption of 3G networks on the same W-CDMA standard that it uses.
But it saw its investments sour, and pulled out of AT&T Wireless Services Inc, Dutch operator KPN Mobile NV and Hutchison 3G UK Holdings after incurring heavy losses.
Japan firms going abroad
Acquisitions abroad by Japanese firms in 2008 already total almost $63 billion, according to Thomson Reuters data, and DoCoMo's Tata investment would come a day after Japanese chemical maker Mitsubishi Rayon announced a $1.6 billion acquisition of British rival Lucite International.
The figure already breaks the previous annual record of $44.2 billion set in 2006.
The Nikkei said DoCoMo will obtain about a 20 per cent stake in Tata Teleservices through new shares and buy the remaining 6 per cent from existing shareholders.
DoCoMo said in a statement it had not made any such decision.
India, with more than 300 million mobile users, is the second-largest wireless market in the world after China, and still has the potential for further huge growth as just over a quarter of its 1.1 billion population use cellphones now.
Research firm Gartner has forecast India's mobile user base will more than double to 737 million by 2012. Japan currently has some 109 million mobile subscribers, about 85 percent of the population.
DoCoMo also aims to provide 3G technologies and other advanced services such as Web browsing and electronic payment through its investment in Tata. Carriers in India at the moment provide only 2G services.
But it could still face tough competition because India plans an auction of radio waves for 3G and 4G wireless services this year and could invite foreign firms like AT&T Inc to enter the market.
Tata's bigger rivals, including Bharti Airtel, Reliance Communications, Vodafone Essar and TM International backed Idea Cellular, are unlikely to cede market share easily.
Shares in DoCoMo were up 1.0 per cent at 159,200 yen as of 0409 GMT, against a 1.5 per cent fall in the Nikkei average.