Mumbai, Nov. 12: NTT DoCoMo, Japan’s top mobile operator, will pay $2.7 billion (around Rs 13,070 crore) to acquire a 26 per cent stake in Tata Teleservices Ltd (TTSL).

The stake purchase in the Tata group’s telecom venture will give the Japanese giant a foothold in the world’s fastest-growing mobile telephony market.

The Japanese company will also make an open offer to acquire up to 20 per cent in Tata Teleservices (Maharashtra) Ltd (TTML) — which provides fixed and wireless telephony services in Maharashtra and Goa — through a joint tender along with Tata Sons, said a Tata group press release.

Tata Sons is the holding company of the group.

Two or three NTT DoCoMo representatives are expected to join the TTSL board.

The deal is significant for several reasons.

First, Tata Teleservices Limited will now have the much needed capital to roll out its GSM operations in eight circles and expand its CDMA services.

This is important as group chairman Ratan N. Tata sent out a directive last week to all group CEOs asking them to tie up as much funding as possible in these difficult times.

“TTSL’s borrowing needs are high. This deal will take care of its capital expenditure requirements for at least the next 18 months,” said an investment banker familiar with the deal.

TTSL — an unlisted company — posted a loss of Rs 1,826.51 crore in the year ended March 31, 2008, according to the CMIE.

The company has been wallowing in losses over the past six years, and most analysts feel that the Tatas have been able to drive a hard bargain with the Japanese giant.

“TTSL has got a great valuation,” said a banker on the condition of anonymity.

Market sources say the deal pegs the enterprise value of TTSL at roughly $11.5 billion (including debt).

TTSL, however, did not confirm this number and the company’s management was not available to respond to queries.

Second, the deal could also inject cash into other group companies, including Tata Sons, that have holdings in TTSL and TTML at a time when the group is facing a cash crunch.

Cash course

Market sources say the 26 per cent stake that NTT DoCoMo will acquire in TTSL will include 20 per cent of fresh equity and another 6 per cent that will come from a “barrage of companies” such as Tata Sons, Tata Power and Tata Steel.

Back-of-the envelope calculations show that the 6 per cent stake translates into roughly $500 million, which will be shared by the existing TTSL shareholders.

This amount could not be confirmed either. Around 80 per cent of TTSL is owned by Tata Sons and group companies.

Temasek — the private equity investment arm of Singapore — holds around 10 per cent in TTSL.

Sources say its stake may go down by nearly one percentage point.

However, it is still unclear whether Temasek will be allowed to raise its stake to the earlier level by buying shares at the price paid by the Japanese company.

Another interesting aspect of the deal is that C. Sivasankaran — a serial entrepreneur who secured his first telecom licence in 1995 and created Aircel — reportedly has a small stake in TTSL.

DoCoMo has been keen to get into India for sometime, having already cut its teeth in the South Asia region with an operation in Bangladesh.

TTSL hopes to get technical knowhow from the Japanese operator and leverage its expertise in the development and delivery of value-added services.

DoCoMo’s foray marks the second large Japanese investment in an Indian company in recent times after Daiichi Sankyo’s buyout of pharmaceutical major Ranbaxy.