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Tata Sons offers to buy Docomo stake at Rs 23 per share

cmn_ Tata Docomo

Tata Sons has offered to buy Japanese telecom player NTT Docomo’s stake in Tata Teleservices Limited for Rs 23.34 a share or at around Rs 11,000 crore, reports Business Standard. The report added that the offer was made on the basis of a fair market value determined on June 30, 2014. Earlier in March, the Reserve Bank of India (RBI) had rejected Tata Sons’ offer n to buy back Docomo’s shares at the pre-agreed valuation of Rs 58 a share (~Rs 27,000 crore for the stake).

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

In November 2008, Docomo had invested $2.2 billion in Tata Teleservices with an understanding that it would get at least 50 per cent of its acquisition price if it exits the Indian company in five years. However, the company’s metrics continued to falter and it reported net losses of ¥85,026 million (Rs 4,887 crore) for the year ended March 31, 2014 (FY14), an increase from ¥72,301 million loss (Rs 4,155 crore) in the previous year FY13.

It’s worth noting that TTSL is an unlisted company unlike its sister company Tata Teleservices Maharashtra Limited (TTML) which is listed on BSE. While TTML is operational only in Goa, Maharashtra and Mumbai circles, it, along with TTSL, provides mobile services under the Tata DOCOMO brand in the country.

TTML reported losses of Rs 169.08 crore loss for the quarter ended December 31, 2014, up from Rs 159.38 crore loss in the previous quarter and Rs 156.36 crore loss in the same quarter last year. Note that this was the telco’s 18th straight loss making quarter.

NTT Docomo & Tata Teleservices’ Timeline

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

During March 2010-March 2012: NTT Docomo invested 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 skipped 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 was 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 were 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 said that it was selling its entire stake comprising 1.25 billion shares (1,248,974,378 shares), representing about 26.5% stake in the telco through the equity method. It planned to exercise this option on or before June 2014.

August 2014: MTN Group was reportedly in talks to acquire Tata Teleservices. Tata Sons had 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 apparently restarted talks with Telenor over possible acquisition of Tata Teleservices. Docomo moved the court of arbitration in London, threatening to foreclose Tata Sons’ assets. In the same month, RBI backed the Tata group’s proposal to buy back Docomo’s 26.5% stake at Rs 58 a share, in the interest of fair commitment in contracts, but sought the finance ministry’s approval.

March 2015:  Reserve Bank rejected Tata’s application after the ministry asked it to stick to the existing norms.

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