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NTT DoCoMo Seeks Arbitration To Sell Tata Stake
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NTT DoCoMo on Monday said it has asked a London court to ensure Tata Sons Ltd finds a buyer willing to pay at least $1.1 billion for the Japanese carrier's stake in a struggling Indian joint venture.
DoCoMo was seeking arbitration after Tata failed to find a buyer for its 26.5 per cent stake in Tata Teleservices Ltd, one of India's smallest mobile networks which has failed to grow its subscriber base at the same rate as its peers.
Price wars are commonplace in India's highly competitive telecoms industry, where foreign firms including Vodafone, Singapore Telecommunications Ltd (SingTel) and Russia's Sistema operate either through joint ventures or as separate entities.
DoCoMo decided to exit Tata Teleservices in July, saying the company had not met undisclosed performance targets, and gave Tata 90 days to find a buyer.
That deadline expired on Dec. 3, and under a pact, Tata had to sell the stake for $1.1 billion - about half the price DoCoMo paid initially - or fair market price, whichever was higher, DoCoMo spokesman Shunsuke Muraki told Reuters.
"Worst case scenario, if the agreement is not followed through, a foreclosure is a possibility," Muraki said.
Tata Sons said in a statement on Monday it was trying to resolve the issue. Tata had tried to sell DoCoMo's stake, bankers with knowledge of the matter said, but it failed to get bidders due to concerns about Tata Teleservices' prospects.
Tata Teleservices' mobile user base increased by 2 per cent at end-October from a year-ago to 64.78 million, lagging both the sector growth of 7 percent and market leader Bharti Airtel Ltd's nearly 10 per cent increase, according to the latest figures from the telecom regulator.
Tata Sons said in a statement on Monday it would continue with efforts to find a solution to the issue.
A Tata Sons spokesperson said, "Yes, we have learnt that Docomo has filed for arbitration. From the outset, Tata Sons has been committed to honouring its obligations to Docomo, and has taken every possible step keeping in mind the interests of all stakeholders and in accordance with law."
The company said said it has made the necessary application to the Reserve Bank of India, and is awaiting a response.
"Tata Sons will continue with its endeavour to find an amicable solution," the spokesperson added.
A person with knowledge of the matter said Tata was willing, and had the liquidity, to buy DoCoMo's stake but could only do so with central bank approval.
It was not immediately clear if the central bank would okay the deal, as the rules prevent foreign investors from selling stakes in Indian firms at a pre-determined price.
DoCoMo paid $2.2 billion in 2009 for the Tata Teleservices stake. The company filed the arbitration request on Jan. 3 with the London Court of International Arbitration to ensure the stake is sold, Muraki said.
DoCoMo's exit from the Tata venture at a deep discount adds to a string of loss-making investments in mobile firms. In the late 1990s and early 2000s, it racked up about $13.6 billion in losses from investments in companies including AT&T Wireless, KPN Mobile and Hutchinson 3G UK. It later sold these stakes.