India's central bank backs Tata buying $1.1B Docomo stake — report

India’s central bank backs Tata buying $1.1B Docomo stake — report

14 JAN 2015

India’s central bank is to suspend rules that prevent Tata Sons from purchasing the 26.5 per cent stake held by NTT Docomo in the struggling Tata Teleservices, the country’s seventh largest operator. The stake is worth at least $1.1 billion.

Docomo exerted pressure on its Indian partner last week by filing an arbitration request with a London court. The Japanese operator asked the London Court of International Arbitration to ensure Tata finds a buyer for its stake.

Now, according to a memo seen by Reuters, the Reserve Bank of India is willing to accept a proposal from Tata to buy the Docomo stake in Tata Teleservices.

A ruling last year insisted that foreign investors should not sell stakes in Indian firms at pre-determined prices. However, the Indian government wants to streamline rules to encourage greater foreign investment, so appears more inclined to leniency in this case.

Docomo originally paid $2.22 billion for its stake in Tata Teleservices in 2009. The purchase agreement meant the Japanese operator could sell its stake for 50 per cent of its original acquisition price, or a fair market price, whichever is higher.

The Japanese operator said in April last year it wanted to offload its stake in the under-performing operator, although first Tata Teleservices needed to miss certain performance targets in the end-March 2014 financial year.

Once it was agreed the targets were not met Docomo requested a sale, which happened in July. Under the agreement, Tata had 90 working days to find a buyer.

Reports from January last year said Vodafone talked to Tata about acquiring its 59.5 per cent stake in Tata Teleservices. Either that interest evaporated or Vodafone is playing a waiting game. Either way, without a buyer, Tata was left having to pick up the stake itself.

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Richard Handford

Richard is the editor of Mobile World Live’s money channel and a contributor to the daily news service. He is an experienced technology and business journalist who previously worked as a freelancer for many publications over the last decade including...

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