Japan’s NTT DoCoMo has filed an arbitration request against Tata Sons for failing to find a buyer for its stake in Tata Teleservices.
NTT DoCoMo holds a 26.5 per cent stake in telecom operator Tata Teleservices Ltd (TTSL). However, the Tatas have been unable to find a buyer for the stake held by the Japanese firm.
The request for arbitration was filed on January 3 at London Court of International Arbitration after Tata Sons failed to fulfill its obligation, despite repeated negotiations, the Japanese company said in a statement.
In April 2014, NTT DoCoMo announced plans to sell its entire stake in TTSL, exiting India five years after entering the country. The exit came after the Indian company failed to achieve certain performance targets.
In March 2009, the Japanese company had acquired the stake in TTSL for $2.7 billion (₹13,070 crore at the then exchange rate).
Under the terms of the shareholder agreement, the Tatas had to find a buyer by December 2014 and in case of failure, it had to buy those shares from DoCoMo. The Japanese company is entitled to get at least ₹7,250 crore for the entire stake, which is 50 per cent of its total acquisition price, from TTSL.
Responding to NTT DoCoMo’s move, Tata Sons spokesperson said that every possible step has been taken to honour the commitment. “Tata Sons has made the necessary application to the Reserve Bank of India, and is awaiting a response,” the spokesperson said, adding that the company will continue with its endeavour to find an amicable solution.
An RBI rule states that when the put option is exercised, it should be based on the prevailing return on equity at the time the option is exercised and not based on a pre-determined valuation. Tata Teleservices has losses of over ₹6,000 crore and its current valuation will be much lower than what the Tatas had agreed to pay the Japanese firm in 2009.