On November 12, Tokyo-based NTT DoCoMo announced it was entering into a strategic alliance with the Tatas. The Japanese telecom giant which, with 53 million customers and 51.5% of the Japanese market, is one of the world's largest players in the telecommunications industry, bought a 26% stake in Tata Teleservices Ltd (TTSL) for $2.7 billion. NTT DoCoMo followed up this deal with an open offer for 20% in Tata Teleservices (Maharashtra) Ltd -- TTML -- the listed subsidiary of TTSL. At Rs24.70 (50 cents) a share, this means another $191 million. The offer will open in January. "We are hoping that this will be a long-term partnership as we are like-minded companies," Tata group chief Ratan Tata told a media briefing soon after the deal was struck.

"The Indian telecom industry is poised for the introduction of new technologies," says Anil Sardana, managing director of TTSL. "Having DoCoMo as a partner will enhance our ability to evaluate, introduce and manage next generation technologies, as and when opportunities arise."

This is obviously a big deal at a time when mergers and acquisitions (M&A) activity has declined in India. It is, in fact, the biggest deal in the Indian telecom market since early 2007, when Vodafone bought a 67% stake in Hutchison Essar (now Vodafone India) for $11.1 billion. Yet the Japanese entry didn't make too many waves.

Both the Tatas and the media are partly responsible for that. The media has been celebrating outbound takeovers -- Jaguar Land Rover (JLR), Corus, Novelis. An inbound acquisition in this environment is a step in the opposite direction. Besides, Indian telecom companies -- Bharti Airtel and Reliance Communications (RCom) -- were supposed to be spreading their wings abroad, targeting MTN of South Africa. Was NTT DoCoMo planning a takeover against the tide? At the media briefing, there were questions about this issue. "At the moment, we have no intention of increasing our stake," Ryuji Yamada, NTT DoCoMo president & CEO, noted.

Credit Crunch

For the Tatas, this is a time to be cautious. On November 6, Ratan Tata sent an email to the top managers of the 100 or so group companies asking them to tighten their belts. The email asked all CEOs to "put on hold any plans for acquisition unless considered strategically critical and also defer non-essential capital expenditure and capacity expansion." It painted a bleak picture. "Some of our companies with substantial foreign operations or those which have made substantial acquisitions are already facing major problems in raising capital or establishing lines of credit for their operations.... In India also, many of our companies already are or will soon face major problems in their access to credit due to the lack of liquidity in the domestic market and also their inability to effectively raise equity due to the depression in the stock market and the erosion of investor confidence..."