When Norway’s Telenor last month paid a handsome $1.1bn for 60 per cent of Unitech Wireless, a greenfield Indian mobile operator, telecom analysts in India were surprised.

After all, Unitech, an untested, green-field mobile operator owned by a property company whose only assets were licences and some spectrum, would not normally be regarded as a prize catch.

So when Japan’s NTT DoCoMo announced it was planning to pay a hefty price valuing one of the Indian industry’s underperformers, Tata Teleservices, at about $10bn – nearly three times the market capitalisation of its nearest competitor – industry insiders were doubly shocked.

“It depends on the value NTT can see in Tata Teleservices, but this deal looks optimistic based on our numbers,” said an analyst at IIFL, a Mumbai-based brokerage.

NTT DoCoMo’s acquisition of what most believe is a lossmaking company (Tata Teleservices, as a private company, does not publicly disclose its financial statements) in the middle of a bear market serves only to underline the growing importance of India to the world telecoms industry.

India is the world’s fastest-growing mobile phone market, ahead even of China. With only 27 per cent of the population owning a mobile, the country is adding 10m subscribers a month, with the total number reaching 315.31m in September, up 50 per cent on a year earlier.

iPhone subsidy and currency dent SingTel profits

SingTel, southeast Asia’s largest telecoms company, said quarterly profit fell 12 per cent and saw lower full-year contributions from its regional associates due to a stronger domestic currency, Reuters reports from Singapore.

State-controlled Singapore Telecommunications, the city-state’s largest listed firm, said profits were hit by subsidies for its iPhone launch and a stronger Singapore dollar versus regional currencies.

It expected lower full-year pre-tax earnings contributions from its mobile associates and said group operating revenue and earnings before interest, tax, depreciation and amortisation (ebitda) would also be hurt by the fall in the Australian dollar.

DMG & Partners analyst Terence Wong said SingTel’s earnings had been hit by lower contributions from Indonesia’s Telkomsel and losses from Pakistan’s Warid Telecom.

“We expect further profit declines over the next few quarters – the outlook is not good,” Mr Wong said.

Fiscal second-quarter attributable net profit was S$868m (US$577m) against S$988m last year.

SingTel made underlying net profit before goodwill and exceptionals of S$801m in the July-September quarter, also down 12 per cent compared with S$914m in the year-ago period, in line with forecasts.

This growth and India’s relatively liberal foreign ownership laws – compared with countries such as China – have attracted a crowd of new foreign entrants.

Vodafone, the UK company that is the world’s largest mobile operator by revenue, is the highest-profile of these. But other groups include Telenor, Russia’s Sistema, and Etisalat of the United Arab Emirates.

Vodafone agreed last year to pay $10.9bn for a controlling stake in Hutchison Essar, then India’s fourth largest wireless phone business. This was seen as a hefty price, at 17 times its forecast earnings before interest, tax, depreciation and amortisation for 2007-08. But Vodafone has already transformed the unit into the country’s third largest mobile operator, with almost 55m customers.

The problem for new entrants is that the allure of India’s growth masks an increasingly crowded market. Vodafone is slugging it out with Bharti Airtel and Reliance Communications – the two top Indian mobile operators – in a vicious price war that has wiped 50 per cent off tariffs this year.

Also, Vodafone is having to make enormous investments in India with capital spending plans of £1.2bn in 2008-09 as it rolls out its network.

These issues partly explain why investors dumped Telenor when it announced it was buying Unitech, a company that will require $2bn of capital spending for its network. Telenor’s shares fell 26 per cent on the day the deal was unveiled.

NTT DoCoMo is facing some of the same challenges, analysts say. Tata Teleservices’ monthly subscriber growth, averaging a bit below 1m in recent months, has lagged behind its nearest competitor Idea Cellular, which overtook it in size this year.

The group has licences based on the CDMA standard across the country but, starting next year, is planning to roll out expensive new GSM standard networks.

The fear, analysts say, is that, once these networks are completed, the group may already have missed the boat. BDA Connect, a telecoms consultancy, estimates that in five years India will be starting to slow down, with 650m-675m subscribers.

Still, NTT, which was advised by JPMorgan, and Tata Teleservices, which was advised in the deal by Lazard, will be hoping their combination of NTT’s size and foreign expertise and Tata’s knowledge of the domestic market will give them an edge.

NTT also defended buying a minority stake in Tata Teleservices, saying it would be big enough to give it veto power over important decisions, that it would have three directors on the board and that there would be deep technical links between the two companies.