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DoCoMo sets floor price for exit

Mumbai, April 25: NTT DoCoMo Inc, Japan’s biggest telecom network by subscribers, has set a floor price of Rs 7,250 crore for selling its 26.5 per cent stake in Tata Teleservices Ltd (TTSL) back to the Tata group.

At a board meeting in Tokyo today, NTT DoCoMo decided to virtually yank the plug on its Indian telecom foray when its directors resolved to exercise an option to sell its entire stake in TTSL “as soon as the conditions for such exercise are met”.

The move ended months of speculation that the Japanese telecom giant was planning to leave the country in frustration over the regulatory hurdles that have constrained growth at the loss-laden Tata group company.

NTT DoCoMo said it hoped to exercise the right to sell its stake enshrined in the shareholders’ agreement with Tata Sons and TTSL.

In 2009, NTT DoCoMo had acquired a 26.5 per cent stake in Tata Teleservices. The investment was made in two tranches: it invested Rs 13,280 crore in March 2009 and another Rs 800 crore in May 2011.

In a statement today, NTT DoCoMo said it had invested 252.3 billion yen in March 2009, which included the acquisition cost. In May 2011, it forked out another 14.4 billion yen.

The Japanese company holds about 1.25 billion shares in TTSL.

“Under the agreement DoCoMo holds the right to require that its TTSL shares be acquired for 50 per cent of the acquisition price, which amounts to Rs 72.5 billion (or 125.4 billion yen) or a fair market price, whichever is higher, in the event that TTSL fails to achieve certain specified performance targets,” the Japanese company said in its note.

The note did not specify what those performance targets were.

DoCoMo hoped to close the deal by June though it said “it is uncertain how the option will be performed.” It wasn’t clear whether the Tatas would be ready to pay so much for the TTSL stake.

“It is not possible to predict how the events will unfold,” a terse note from Tata Sons said, echoing a line that NTT DoCoMo had put out in their statement earlier in the day.

“Tata Sons is cognizant of its responsibilities and will act keeping in mind the interest of all stakeholders and in accordance with the law,” the note added.

NTT DoCoMo owns another 11.76 per cent in another listed entity, Tata Teleservices (Maharashtra).

It did not say whether it intended to sell this stake as well.

The stake in TTSL (Maharashtra) was acquired under an open offer that Tata Sons and NTT DoCoMo made in February 2009. TTSL acquired 229.8 million shares at an offer price of Rs 24.70 per share. At that time, the Japanese company had exercised its option to acquire all the shares tendered in response to the offer. Under the original terms of the offer, Tata Sons and NTT DoCoMo were supposed to acquire 50 per cent each of the total number of shares tendered.

The situation has been muddied further by speculation that Vodafone Plc, which recently bought out all its minority shareholders in its India operations, may choose to make a play for TTSL to consolidate its position in the industry.

Some sections of the media have said the Tatas were ready to sell out TTSL to Vodafone.

However, Tata Sons said today: “TTSL continues to be an integral part of the Tata group.”

TTSL was one of the first telecom providers to launch 3G services in India after acquiring licences in nine circles in May 2010 auction. It also provides GSM services under the Tata DoCoMo brandname.

Merger rules in telecom were relaxed in December 2011. Telecom mergers and acquisitions will get automatic clearance if the combined market share of the new entity is less than 35 per cent and spectrum holding is less than 25 per cent.

When the market cap is more than 35 per cent but less than 60 per cent, Trai will examine the case to avoid the creation of a monopoly.

 
 
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