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NTT Docomo files Intl arbitration charges over Tata Tele’s stake sale

NTT Docomo has requested the London Court of International Arbitration to ensure that Tata Sons find a suitable buyer for Docomo’s 26.5% stake in Tata Teleservices Limited (TTSL). The company said that it filed this arbitration request on January 3, after Tata Sons failed to fulfill its obligation, despite its repeated negotiations on the sale of its entire stake.

cmn_ Tata Docomo

Docomo spokesman Shunsuke Muraki told Reuters that it had given 90 days to Tata Sons in July 2014, to find a suitable buyer to purchase its stake for Rs 7,250 crore (about 50% of the acquisition price) or a fair market price, whichever is higher. However, the company was unable to find a buyer by December 3, which led to this arbitration request. He added that if the agreement is not followed through, they might even consider foreclosure.

It’s worth noting that Docomo had earlier hinted at exercising the International arbitration option to put pressure on the Tatas to buy back its 26.5% stake in Tata Teleservices.

Tata struggling to find a buyer?

It seems like Tata is struggling to find buyers for the loss-making Tata Teleservices. Last week, The Hindu Business Line reported that Tata had restarted acquisition talks with Telenor, although the company clarified to BSE that this is a speculation and said “we are not in possession of any unpublished price sensitive information that is required to be intimated to the Exchanges in terms of the Listing Agreement”.

Prior to this, South African telecom major MTN Group was reportedly in talks to acquire Tata Teleservices (TTSL) and Tata Teleservices Maharashtra (TTML). Vodafone was also earlier rumored to be in talks to acquire both the companies from Tata Group, enabling the latter to exit the telecom industry altogether. However, the talks reportedly broke down later due differences over valuation.

NTT Docomo & Tata Teleservices Timeline

March 2009: NTT Docomo had acquired 26% stake in Tata Teleservices in March 2009, after receiving the Government nod to buy 27.31% stake in TTSL for Rs 12,924 crore.

During March 2010-March 2012: NTT Docomo invests a further Rs 784 crore over two financial years ending March 2012.

Feb 2012: Three of Tata Teleservices’ 2G licenses were cancelled by the Supreme Court.

October 2012: NTT Docomo skips an option to increase the Tata Tele stake to 35% in March 2012, citing the existing regulatory situation in the country.

June 2013: Reports suggests that NTT Docomo is looking to sell its stake to Sistema.

July 2013: NTT Docomo denies stake sale talks with Sistema.

Feb 2014: Tata Teleservices was the only telco among the qualified bidders who didn’t pick up spectrum either in the 1800MHz band or the 900MHz band. Reports suggest that Tatas are looking to exit the telecom industry altogether and in talks to sell Tata Communications and Tata Teleservices to Vodafone.

March 2014: NTT Docomo had another call option to increase the Tata Tele stake to 51% or else sell the 26% stake back to Tata group at a negotiated price, which the company likely skipped as well.

April 2014: NTT Docomo says that it is selling its entire stake comprising 1.25 billion shares (1,248,974,378 shares) which represents about 26.5% stake in the telco through the equity method. The company says it plans to exercise this option in or before June 2014.

August 2014: MTN Group is reportedly in talks to acquire Tata Teleservices. Tata Sons has also apparently pledged shares of its group companies Tata Consultancy Services (TCS), Tata Motors, Tata Steel and Tata Power to raise Rs 7,200 crore in order to buy out NTT DOCOMO’s 26% stake.

Jan 2015: Tata Group has apparently restarted talks with Telenor over possible acquisition of Tata Teleservices.

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