Wednesday, April 2, 2008

Videocon eyeing Motorola`s handset biz: report

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India Infoline News Service / Mumbai Apr 02, 2008 10:54

According to media reports, Videocon group chairman said that we have expressed our interest in acquiring Motorola’s handset business. We learnt from a reliable source that they will be selling it and when they do we are sending an expression of interest.

The Videocon group is planning to bid for Motorola's troubled handset unit, if the US-based company decides to sell the loss-making business. According to media reports, Videocon group Chairman Venugopal Dhoot has been quoted as saying that Videocon is in the initial stages of evaluating a bid.

"We have learnt from a reliable source that they (Motorola) will be selling it and when they do we are sending an expression of interest," he added. According to a financial daily, the group has hired a leading investment banker to convey its interest to buy out the mobile handset business of Motorola.

Motorola, on March 26 said it plans to split into two companies next year amid pressure from billionaire investor Carl Icahn to spin off the handset business that it pioneered 25 years ago. The board is looking for a new CEO for the mobile handset business, Motorola said.

Motorola spokespersons declined to comment on the news.

Motorola's handset business may be worth about US $3.8bn, according to Merrill Lynch. That's more than double the market value of Videocon Industries Ltd., the Videocon group's listed company. Some analysts say Motorola won't sell its mobile handset business to Videocon as it does not have a global brand value.

Having said that there are definite synergies to be had as Videocon group's subsidiary Datacom has received license for launching pan-India mobile operations and is awaiting allotment of spectrum.

The group plans to invest Rs60bn on the mobile services business across all the 23 circles in India. It is looking at a subscriber base of 25mn in the next three years. India adds around 7-8mn new mobile users every month.

So, the potential is quite big given the tele-density of just 25% in the country. At the same time, the challenges too are quite a few. One is the stiff competition among global mobile phone makers and low margins of the business.

Second, how will Videocon fund the acquisition, considering the ongoing turmoil in global credit markets. Another issue is how to revive the Motorola brand, which has seen its market share erode considerably over the past 12 months. Motorola has lost its No.2 spot to Samsung due to lack of strong products.

Last year, Motorola sold over 159mn mobil e phones globally. Its market share is down to around 14%, just behind Samsung, and way below Nokia, which is the No.1 brand with a market share of close to 40%.

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