Japanese operator NTT Docomo is in the process of negotiating its exit from Indian player Tata Teleservices, also known as Tata Docomo, but the deal value may represent a stumbling block.
In April, NTT indicated it would exercise its put option by a…
Japanese operator NTT Docomo is in the process of negotiating its exit from Indian player Tata Teleservices, also known as Tata Docomo, but the deal value may represent a stumbling block.
In April, NTT indicated it would exercise its put option by a July deadline.
It said at the time that it expected to receive Y125.4bn (US$1.2bn), which is half of its initial investment, or a fair market price – whichever is higher – for its 26% stake in the mobile player.
Conglomerate Tata Group, which owns the remaining 74% in the joint venture, will buy out its Japanese partner and confirmed to the Economic Times that NTT Docomo recently launched the exit process.
However, Tata reportedly expects regulatory hurdles following a ruling from the country’s central bank, which states that put options must be exercised based on prevailing return on equity at the time the option is exercised.
This might prevent NTT Docomo from getting the price it is after because the JV’s debt pile amounts to US$4.6bn and its net worth is negative.
Tata and NTT, which were not immediately available to comment, have been lining up legal advisers as they expect lengthy negotiations, according to the Economic Times.
NTT and Tata formed Tata Tele in late 2008 and launched GSM services the following year. The Japanese group made an initial investment of Y252bn (US$2.47bn) in the operator and spent a further Y14.4bn (US$141m) in 2011.
In India’s most recent spectrum auction in February, Tata Teleservices was the only participant that failed to acquire frequencies.
Tata Teleservices says it serves over 84 million customers in more than 450,000 towns and villages across India. It primarily offers mobile services, but also provides wireless desktop phones, public booth telephony and fixed line services.
