Videocon offers to buy out Motorola's handset biz

Consumer durables heavyweight Videocon has put in a bid to acquire the loss-making handset business of Motorola as part of an attempt to shore up its planned wireless services business in India, one of the world’s fastest-growing mobile markets. Videocon’s interest has stunned industry watchers at a time when other top probable candidates like LG, Nokia, Samsung and Sony-Ericsson have declined to show similar interest.

Videocon Industries chairman Venugopal Dhoot confirmed his interest in bidding for the mobile devices business of Motorola. The world’s third-largest handset maker had announced on March 26 its intention to hive off the mobile devices business into a separate company. the deal will be financed through a combination of around Rs 1,800 crore of cash reserves and long-term loans raised in the global market. Motorola’s mobile business is expected to be valued at between $3.5 billion and $4 billion. Motorola also has a handset manufacturing facility in Chennai that makes both CDMA and GSM mobile phones.

Videocon’s telecom subsidiary Datacom has already received licences to offer mobile services throughout India and is awaiting allotment of spectrum to launch commercial operations. Videocon has already announced an initial investment of Rs 6,000 crore for its telecom operations in 23 circles of the country and is eyeing 25 million customers in the next three years. Its handset business will be an added advantage as the company can bundle attractive offers with mobiles.

The handset business is growing rapidly in India as the demand for mobile services is scorching. The Indian market for mobile phones is around 120 million units a year. Videocon already has a strong distribution network that will help the company in garnering market share in short time. With a tele-density of 25% in a country of 113 crore people, there remains immense room for growth. The acquisition, if it comes through, will give a boost to Videocon’s plans to become a pan-India player.