Although the details are a bit sketchy, Wal-Mart has entered a "cooperation agreement" with Bharti Group, an Indian conglomerate and the nation's leading mobile phone operator. Wal-Mart beat out Tesco (OTC: TSCDY.PK) to close the deal.
Wal-Mart and Bharti Group will each contribute $100 million to form a new joint venture. Then, beginning in 2007, Bharti Group will roll out retail stores across India. The goal is to open the first stores on Aug. 15, 2007, the Indian Independence Day holiday.
This convoluted process is necessary to circumvent the hurdles that face foreign companies operating in India.
But this deal is more than just a clever way to find loopholes; Wal-Mart's new partner is a standout. The company's founder, Sunil Bharti Mittal, is a highly successful entrepreneur who has built a multibillion-dollar empire. Since he started the company in the mid-1970s, Mittal has been able to effectively manage India's web of complex regulations. This expertise should be a big help to Wal-Mart in confronting governmental headwinds.
Mittal has been quite adept at consolidating India's mobile technology industry, and it's also forged strategic alliances with global companies such as IBM
India is doubtlessly the kind of opportunity big enough to "move the needle" for Wal-Mart. Currently, India's retail market is estimated to be around $300 billion, and that sum is expected to double over the next 10 years.
It will take at least a couple of years for Wal-Mart to gain traction in India. But assuming that both parties can collaborate effectively, this deal may ultimately help bring growth back to the U.S. retail giant.
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