Wal-Mart in joint venture with Indian telecom firm

NEW DELHI —  India may one day have stores displaying the Wal-Mart brand despite government rules that prevent foreign companies from operating multi-product retail chains here.

Wal-Mart Stores Inc. has teamed with India’s top telecommunications company, Bharti Airtel Ltd., in a joint venture that would set up hundreds of stores across the country, the chairman and chief executive of the Indian company said Monday.

The two companies had signed a memorandum of understanding for a joint venture and a franchise agreement, Sunil Bharti Mittal told reporters at an international business summit in New Delhi.

Mittal declined to divulge financial terms but said the venture would be “a partnership of equals.”

One analyst said the deal would benefit both companies. “It’s a great fit for Wal-Mart as Bharti knows the rules of the game and will save Wal-Mart a lot of time and energy to overcome the system,” Viswanathan Vasudevan, who helps manage $200 million in stocks at Aquarius Investment Advisors in Singapore, told Bloomberg News. “For Bharti, you can’t get a better partner than Wal-Mart in retail.”

It wasn’t immediately clear whether Bentonville, Ark.-based Wal-Mart had given up on plans to open its own stores in India, where resistance from political groups and domestic businesses has prevented the government from approving foreign-based multi-product retail chains.

“It is too early for us to comment further as we have just begun our relationship with Bharti,” Wal-Mart said by e-mail. “We are pleased to be in discussions with such a well-respected company that truly understands India’s fast-growing retail market.”

That market, estimated at more than $200 billion a year, is dominated by more than 12 million mom-and-pop shops, with company-owned network stores accounting for less than 5% of sales. But rising middle-class incomes and an increase in demand for branded products make India a compelling destination for global retailers.

Bharti Airtel is a popular brand in India, offering mobile phone service to more than 24 million users.

Mittal, expressing his hope that the joint venture with Wal-Mart could open stores as early as August, said the deal complied with government rules.

Although India does not allow foreign companies to open multi-product retail stores, they can make wholesale purchases to support their global supply chains. Wal-Mart already operates a procurement center in the southern Indian city of Bangalore. The company is expected to source products worth nearly $2 billion from India for Wal-Mart stores worldwide this year.

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The Associated Press and Bloomberg News were used in compiling this report.