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Tata Sons told to pay $1.17 bn in arbitration with NTT DoCoMo

24 June, 2016

Japanese mobile-phone operator NTT DoCoMo Inc said on Friday an arbitration court has awarded the company $1.17 billion in damages in a dispute with India’s Tata Sons Ltd.

The London Court of International Arbitration told the Tata group’s holding company to pay the damages for breach of the shareholders’ agreement after NTT DoCoMo tendered its entire stake in Tata Teleservices Limited (TTSL) to Tata Sons, the Japanese firm said.

NTT DoCoMo had filed for arbitration on 3 January 2015.

The Japanese firm, which got a new CEO a week ago, said some of the clauses related to the arbitration award remain uncertain, including whether Tata Sons will actually pay the awarded damages and when the delivery of TTSL’s shares will be made.

A spokesperson for Tata Sons said the company has received the arbitration award and that it is studying it. The spokesperson didn’t comment further, saying only that Tata Sons has always discharged its contractual obligations as per law.

The dispute

NTT entered India in March 2009 by acquiring a 26.5% stake in TTSL, which then provided telecom services on the CDMA technology. The investment was made in two tranches; around Rs 13,280 crore ($2.57 billion then) in March 2009 and Rs 800 crore ($178 million) in May 2011. After the deal, TTSL co-branded its GSM service that it launched in 2009 as Tata DoCoMo.

At the time of signing the agreement, Tata and NTT DoCoMo agreed that the Japanese company could sell its shares if the Indian mobile phone joint venture failed to achieve the performance target for the financial year ended March 2014.

In April 2014, NTT decided to exercise the option to unload its stake in loss-making TTSL. This would have led to its exit from India’s fiercely competitive and crowded telecom market. NTT exercised the option in July to sell the stake to either a third party or to Tata Sons. However, it filed for arbitration after the Tata group failed to find a buyer for the stake.

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

NTT had separately also picked up a stake in the listed firm Tata Teleservices (Maharashtra) Ltd for Rs 570 crore, which provides telecom services in Maharashtra and Goa. NTT DoCoMo owns over 11% of the TTSL associate firm and was also to sell this stake.

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

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

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

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Tata Sons told to pay $1.17 bn in arbitration with NTT DoCoMo

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