NTT DoCoMo Inc has 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 mark its virtual exit from India’s fiercely competitive and crowded telecom market.
The Japanese mobile solutions provider did not say if the firm intends to sell the stake back to Tata Group or to a third party. 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.
NTT DoCoMo also separately owns 11.76 per cent in listed firm Tata Teleservices (Maharashtra), an associate firm of Tata Teleservices. It is not clear if NTT DoCoMo will also sell this stake immediately. Tata Teleservices (Maharashtra) provides telecom services in the telecom circles of Maharashtra (including Mumbai) and Goa.
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.
Tata Teleservices was in the process of 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 for at least half of the acquisition cost (roughly Rs 7,250 crore or $1.18 billion now) or the fair market price, whichever is higher.
The Japanese company said on Friday that its board has decided to exercise this option for the sale of the company’s entire stake (1,248,974,378 shares, or about 26.5 per cent of outstanding shares) in Tata Teleservices as soon as the conditions for such exercise are met. It said it plans to exercise the right in or before June 2014.
The firm added, “It is uncertain how the option will be performed, and DoCoMo is not able to predict how events will unfold. The effect on DoCoMo’s corporate earnings for the fiscal year ending March 31, 2015 cannot be forecast at this time due to these uncertainties.”
Tata Group’s holding in Tata Teleservices is spread across various group firms such as Tata Industries, Tata Steel, Tata Communications, Tata Chemicals, 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 is currently the seventh-largest mobile services provider with a market share of 7 per cent among the 12 firms in India with 63.14 million subscribers as of February 28, 2014. In the wireline segment it is the fourth-largest player among eight firms with 5.35 per cent share.
(Edited by Joby Puthuparampil Johnson)