NTT Docomo has filed for arbitration with the holding company of Tata Group after the latter failed to find a suitable buyer for the Japanese telco’s stake in their India-based joint venture Tata Teleservices.
Last July, NTT exercised its right under…
NTT Docomo has filed for arbitration with the holding company of Tata Group after the latter failed to find a suitable buyer for the Japanese telco’s stake in their India-based joint venture Tata Teleservices.
Last July, NTT exercised its right under a shareholders agreement with Tata Sons to ask it to find a buyer prepared to pay at least Rs72.5bn (US$1.14bn), half of its initial investment, for its 26.5% holding in the JV, also known as Tata Docomo.
At the time, the Japanese company said Tata Teleservices had not met certain performance targets and gave the Indian conglomerate 90 days to find a suitable buyer.
In its statement today, NTT said the arbitration request, filed with the London Court of International Arbitration, was driven by Tata Sons’ failure to find a buyer despite “repeated negotiations” on the subject.
In its own statement, Tata Sons said it “has been committed to honouring its obligations to [NTT] and has taken every possible step keeping in mind the interests of all stakeholders and in accordance with law”.
In July, Tata Sons was expected to buy NTT’s shares; however, the Indian company reportedly expected regulatory hurdles following a ruling from the country’s central bank stating that put options must be exercised based on the prevailing return on equity at the time.
Tata Sons is still willing and able to buy the shares but needs the central bank’s approval, Reuters cited a person with knowledge of the matter as saying.
The Indian company has been unsuccessful in finding other bidders for the stake because of concerns about Tata Teleservices’ future prospects, the report cited bankers with knowledge of the matter as saying.
Meanwhile, the Wall Street Journal cited people familiar with the matter as saying Tata Sons would also like to exit the JV.
For its part, Tata Teleservices issued a statement in response to a recent report in India’s The Hindu Business Line, which speculated that the company was back in talks with Norwegian telco Telenor about a possible acquisition.
“In this regard, kindly note that we are not in possession of any unpublished price sensitive information that is required to be intimated to the [stock] exchanges in terms of the listing agreement,” the Mumbai-based company said.
NTT and Tata Sons 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.
Tata Teleservices is the seventh-largest of India’s mobile network operators.
