Virgin Group to exit joint venture with Tata Teleservices

Thomas K. Thomas Adith Charlie New Delhi/ Mumbai | Updated on May 02, 2011

Sir. Richard Branson, Chairman and Founder, Virgin Group (file photo)   -  Business Line


After riding with the Tatas for three years, the Richard Branson-promoted Virgin Group has exited from the joint venture company, Virgin Mobile India.

Virgin's partner in the venture, Tata Teleservices (TTSL), has agreed to buy out the 50 per cent stake held by the UK-based company for an undisclosed amount, sources close to the development told Business Line.

It may be recalled that the Virgin Group had signed two business agreements with the Tatas in 2008. One was a 50:50 joint venture for marketing mobile connections on a revenue-share basis, and the other was a branding arrangement that allowed TTSL to use the Virgin brand against payment of royalty.

It is reliably learned that while the joint venture is being dismantled, the two parties will continue with the branding arrangement at least for the foreseeable future. This means that TTSL will continue to pay a royalty fee to Virgin for three years, the sources said.

A PR representative for Tata Teleservices said the company will not comment on this development. Mr M. A. Madhusudan, Chief Executive Officer of Virgin India, did not respond to a questionnaire that sought to get an official confirmation from the company. But sources said the move was expected considering that Tata Tele was integrating all its telecom-specific businesses under one umbrella.

The process had started with integrating Tata Teleservices (Maharashtra) and the next step could be to bring other business units under TTSL. This will enable the company to merge its sales, marketing and distribution teams and achieve cost synergies by reducing redundancies, sources said.

Virgin India had initially launched its services on the Tata Teleservices CDMA platform. The Virgin brand quickly became a marketing hit thanks to its catchy advertisement campaigns that were targeted at the youth. However, it could not sustain the initial demand and slowly began to slide on the market share front. Last year, after Tata Tele got dual-technology permission, Virgin moved into the GSM space as well.

Industry analysts feel that the Tatas' focus in the joint venture had diluted after it entered into an equity partnership with DoCoMo Corporation of Japan, subsequent to which it launched the Tata DoCoMo brand.

In fact, Virgin India has seen an exodus of senior management professionals of late. Sources say the company has wound up some of its key offices in several parts of the country.

Published on April 13, 2011

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