NTT DoCoMo in arbitration with Tata Sons over $1B plus stake sale in Tata Teleservices

NTT DoCoMo Inc has filed for arbitration against Tata Sons Ltd, the holding company of Tata group, in connection with its pending deal to offload its 26.5 per cent equity stake in loss-making Tata Teleservices Ltd.

The request has been filed at London Court of International Arbitration, it said on Monday.

Earlier in April, the Japanese mobile solutions provider had decided to exercise the option to unload its 26.5 per cent equity stake in loss-making Tata Teleservices Ltd by June 2014, which would have led to its virtual exit from India's fiercely competitive and crowded telecom market.

NTT DoCoMo had exercised the option in July to sell the stake to either a third party or to Tata Sons. However, Tata group failed to find a buyer for the aforesaid stake, following which the arbitration request was filed on January 3, 2015, the statement said.

It had sought to sell its stake in the firm for Rs 7,250 crore (over $1.1 billion) or more according to fair market price valuation. This was based on the understanding of the transaction being priced at least 50 per cent of the original investment amount.

NTT DoCoMo had entered the Indian market in March 2009 by acquiring 26.5 per cent in CDMA technology-based privately held telecom firm Tata Teleservices. The investment was rolled in two tranches starting with around Rs 13,280 crore ($2.57 billion then) in March 2009 and Rs 800 crore ($178 million) in May 2011.

It had separately also picked stake in the listed firm Tata Teleservices (Maharashtra) for Rs 570 crore. NTT DoCoMo owns 11.76 per cent in listed firm Tata Teleservices (Maharashtra), an associate firm of Tata Teleservices. Given the proposed transaction, NTT DoCoMo was also to sell this stake. Tata Teleservices (Maharashtra) provides telecom services in the telecom circles of Maharashtra (including Mumbai) and Goa.

Tata Teleservices was launching its GSM technology based services in 2009 and post the deal, the firm co-branded its GSM service as Tata DoCoMo.

At the time of signing the agreement, Tata and NTT DoCoMo agreed that if the Indian mobile phone joint venture failed to achieve performance target for the financial year 2013-14 (which ended on March 31, 2014), it could sell its shares.

Media reports had earlier said that Tata group is looking to exit the telecom business completely by selling both Tata Teleservices and Tata Communications in what could be a multi-tiered deal with Vodafone being a likely acquirer.

Tata Group’s holding in Tata Teleservices is spread across various group firms such as Tata Industries, Tata Steel, Tata Communications, Tata Chemicals and Tata Power besides the group holding firm Tata Sons. Other shareholders of the company include Singapore’s sovereign wealth fund Temasek and private equity firm 2i Capital besides industrialist C Sivasankaran, chairman of Siva Group.

In terms of subscriber base, Tata Teleservices does not figure among the top five mobile service providers in the country. 

(Edited by Joby Puthuparampil Johnson)

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