India Inc. at Digital Inspiration

Videocon looks to buy Motorola handset biz to derive telecom synergy

Posted: 01 Apr 2008 11:10 AM CDT

Videocon Group is doing what it knows best, buying out global electronic giants. After Thomson, Electrolux and a failed Daewoo attempt, it is now eyeing world's third largest mobile maker (after Nokia and Samsung) Motorola's handset business.

Motorola a week back had decided to dispose its loss making handset division as its flagship Razr model has been losing sales to Apple's iPhone, RIM's Blackberry and Samsung's BlackJack.

But for Videocon, the deal may mean that it gets to expand its value chain since it already retails consumer durables and has acquired licence to offer mobile phone service in 22 circles through its subsidiary Datacom.

Videocon also has a retail network of 1000 shops through Next and recently acquired Planet M stores.

With India expected to become second biggest wireless market in world, Videocon can expect to win substantial number of customers.

As per Merrill Lynch valuations, Motorola’s handset business may be worth about $3.8 billion which is more than twice the market value of Videocon Industries Ltd. With stock market witnessing a bearish phase, it will be difficult for Videocon to get appropriate funding for the deal.

Videocon also lacks in having expertise in mobile phone software which is much needed for bringing the Motorola's handset business back to profitability.

If indeed the deal materialises, due to growing financial constraints, it may not go down well for Videocon's share price as has been recently witnessed in Tata Motors and Jaguar-Land Rover deal.

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