Videocon May Bid for Motorola's Mobile-Phone Business (Update5)
By Harichandan Arakali
April 1 (Bloomberg) -- Videocon Group, India's largest consumer electronics maker, may offer to buy Motorola Inc.'s mobile-phone business as it prepares to start wireless services in a market set to become the second-biggest in the world.
The closely held group is in the initial stages of evaluating a bid, Chairman Venugopal Dhoot said in a telephone interview today, declining to specify financial terms because they haven't been determined yet. Mary Lamb, a Hong Kong-based Motorola spokeswoman, declined to comment.
Motorola's unprofitable handset business has a value of at least $3.8 billion, according to Merrill Lynch & Co. estimates, or five times Videocon's failed bid for South Korea's Daewoo Electronics Corp. An acquisition would give the Indian company entry to the mobile-phone market as the world's third-largest producer behind Nokia Oyj and Samsung Electronics Co.
``Videocon is looking for acquisitions, but Motorola seems like a bit of a stretch,'' said Mahesh Patil, who oversees $800 million in stocks at Mumbai-based Birla Sun Life Asset Management Co., including Videocon shares. ``The period of easy money is behind us and I think in this current environment, funding for this kind of deal may be difficult.''
Merrill's estimated value of Motorola's handset business is more than double the market value of Videocon Industries Ltd., the group's listed company that failed last year to acquire Daewoo after creditors rejected a 700 billion won ($711 million) offer for the South Korean company.
`Very, Very Interested'
Videocon, based in Aurangabad, owns oil exploration and television glass-tube manufacturing assets. A Videocon bid for Motorola's division would follow Tata Motors Ltd.'s agreement to buy Ford Motor Co.'s Jaguar and Land Rover last month, underscoring the growing ambitions of Indian companies to acquire global brands.
``We are in consumer durables, we are in retail and we also have'' mobile-phone licenses in India, Dhoot said today. ``We are very, very interested.''
Videocon Industries shares rose 2.5 percent to 314.55 rupees at the close of trading on the Bombay Stock Exchange. They have dropped 62 percent this year.
Videocon plans to start offering mobile-phone services in India by the end of this year. The company, which won the wireless licenses earlier this year, is in talks to sell a stake in its own mobile-phone unit to an overseas company, Dhoot said in a Jan. 11 interview. The company expects to win 20 million subscribers within four years, he said at that time.
Motorola Shares
Motorola, based in Schaumburg, Illinois, rose 17 cents, or 1.8 percent, to $9.47 at 4:01 p.m. in New York Stock Exchange composite trading. The stock has slid 41 percent this year as customers defected to phones from Apple Inc. and Nokia.
On March 26, Motorola announced plans to split into two companies next year amid pressure from billionaire investor Carl Icahn to break off the mobile-phone business that it pioneered 25 years ago. The board is looking for a new chief executive officer for the phone business, Motorola said that day.
Icahn began calling for Motorola to dispose off the handset division last year. The company's Razr model, introduced in 2004, has lost out to competitors with more features, including the iPhone from Apple, Research In Motion Ltd.'s BlackBerry and Samsung Electronics Co.'s BlackJack.
A successful bid by Videocon is ``very unlikely,'' said Richard Windsor, a Nomura International analyst in London. ``Indian companies don't have what is required to fix Motorola.''
Lacking Software
To bring Motorola's handset business back to profitability a buyer will need experience in mobile-phone software, which Videocon lacks, said Windsor, who recommends holding on to Motorola stock.
The handset division lost $1.2 billion last year as revenue from phones slid 33 percent. Meanwhile sales of the iPhone, which combines a Web-browsing mobile phone with an iPod media player, and new BlackBerrys with music and video functions soared.
At $3.8 billion, Motorola's handset unit would be worth as little as tenth of the $40 billion it was worth in 2006, according to Citigroup Inc. analyst Jim Suva in San Francisco. Some analysts estimate the unit is now worth $5 a share, or $11.3 billion, or more.
India may overtake the U.S. this month as the world's second-largest mobile-phone market after China, the Telecom Regulatory Authority of India said on March 24. The South Asian nation had 250.9 million wireless subscribers at the end of February, compared with 260.5 million in the U.S. and 540.5 million in China.
Videocon Acquisitions
Videocon's acquisitions in the past three years have included Thomson SA's television glass-tube business and Electrolux AB's Indian appliance operations.
The company, which began operations in 1979 and started making color TVs in 1987, uses actor Shah Rukh Khan and Mahendra Singh Dhoni, India's one-day cricket captain, in commercials that aim to depict Videocon as an ``Indian multinational.'' It competes with domestic, Japanese and South Korean companies selling kitchen appliances and consumer electronics in India.
Videocon accounts for 23 percent of India's market for consumer electronics such as televisions, refrigerators and air conditioners, according to Anant Panshikar, Videocon's head of corporate communications.
Videocon is reviewing a proposal it received from a U.S. investment bank, Dhoot said. He declined to identify the bank.
To contact the reporter on this story: Harichandan Arakali in Bangalore at harakali@bloomberg.net
Last Updated: April 1, 2008 16:15 EDT |
