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Motorola, Videocon Talks Escalate

The Indian consumer electronics provider is interested in acquiring Motorola's troubled handset business.
Indian consumer electronics provider Videocon Industries wants to buy Motorola's handset business, and Motorola wants to sell it. So what's holding up a deal?

About $3.8 billion -- the price tag some U.S. investment banks have put on the troubled Motorola unit. Videocon logged some $2.6 billion in revenue in its latest fiscal year ended in September.

Media reports in India initially said in early April that Videocon, which is rapidly branching out in the Indian mobile phone market, was interested in acquiring Motorola's mobile devices unit. This week, Indian media outlets are reporting that Videocon's interest has progressed to the talking stage, although neither company will discuss any negotiations.

Besides the hefty price tag to a relatively small company like Videocon, there is another problem complicating a deal -- Videocon is interested in acquiring General Electric's appliances division, which is also for sale.

With falling revenue, profits, and handset market share, Motorola has said it expects to sell or spin off the handset unit in 2009. Shareholder activist Carl Icahn has extracted a pledge by Motorola to try to sell the mobile devices unit and keep its broadband and mobility solutions unit, a catch-all operation that houses several separate Motorola units.

Videocon is preparing to beef up its mobile phone operation in India. According to recent media reports, Videocon executives have said they could have 25 million subscribers in three years. The company has 700 retail outlets and is adding to that number at a rapid clip.