Dhoots in telecom, to partner Verizon

The $88-billion US telecom giant Verizon has tied up with consumer electronics heavyweight Videocon to offer international long-distance (ILD) services in India.

Verizon, which is keen to tap the lucrative market for long-distance calls from India, has formed a JV — Verizon Communications India —with Leo Communications, part of the $3-billion Videocon group.

The initial investment in the venture is estimated to be over $30 million. “The JV is in the process of applying for a licence to provide ILD services,” people familiar with the development told ET. Verizon will hold 74% in the JV, while the rest will be held by Leo Communications. FDI regulations restrict foreign ownership in telecom entities to 74%.

Videocon chief Venugopal Dhoot declined to comment. “It is too early to disclose details,” he said.

India is a lucrative market for telecom companies and teledensity is just around 16%. The wireless business is growing very fast and the number of people calling overseas from India is rising fast every year. The annual ILD outgoing minutes from India were 2,500 million in 2005-06 and are expected to rise to 3,500 million by March this year.

However, sources close to the deal said Videocon sees synergy in the fast-growing space of telecom and connectivity with its existing businesses. “The partnership makes great business sense for us, especially given the convergence in the digital and electronics segment including IT hardware etc,” an official said.

Videocon is a leading player in the consumer electronics and household appliances segment. It also produces CRT glass, colour picture tubes and other key components. Company watchers said Videocon is likely to be more of a financial partner in the JV and would eventually sell out in the long run.

This is yet another diversification for the Videocon group, which began as colour television maker from Aurangabad. Over the years, the group has built a business in oil and is now looking to enter the telecom sector.

Verizon Business India will offer companies operating in India direct access to Verizon Business’ advanced IP communications portfolio.