Tata-Virgin Mobile partnership, a long term play?

After Vodafone, another UK based mobile company, Virgin Mobile if forming a 50:50 JV with Tata TeleServices (TTSL). The JV will be more towards adding Value Added Services and handsets targeting youth, which comprises 50% of Indian mobile market, rather than owning the network.

This implies that Tata Indicom would be a mass market brand, while Virgin would become a premium brand. However, there may be a conflict of interest as Essar already has a partnership with Virgin for opening mobile shops ‘The Mobile Store’ throughout India.

We doubt whether Tata would be able to fully leverage on its partner strength, as it has more to do with a brand rather than actual improvement in product offering. Tata also needs to merge all its telecom subsidiaries to derive a proper valuation and then offer a stake to raise funds.

In the CDMA space, Tata Teleservices is a laggard as compared to Reliance Communications, but given Virgin’s expertise in CDMA space in USA and South Africa, it will definitely benefit from the JV and expand its ‘Indicom’ brand.

Tata may also have a long term goal plan as given Tata’s appetite to go global, these two companies may start their services in other countries too by acquiring stake of new operators or starting their own just as Airtel and Vodafone have done in Ireland.

Venture Itch adds that Tatas has a scattered and multiple telecom businesses depriving it of providing a bundled offering. Tatas already have a partnership with UK based Sky Corp for its DTH business and may want to use the media and telecom business in close sync. The article also adds that Tatas, instead of following the trend of outsourcing network services has decided to do the same on its own.