DOCOMO files for international arbitration over TTSL exit

5 Jan 2015

NTT DOCOMO has filed an arbitration request with the London Court of International Arbitration to settle a dispute with Tata Group over the Japanese firm’s attempt to exit their joint venture, Tata Teleservices Ltd (TTSL). Under the terms of the 2009 shareholder agreement between DOCOMO and Tata, if TTSL failed to achieve certain performance targets, DOCOMO has the right to require that its 26.5% share in TTSL be acquired for either 50% of the acquisition price (INR72.5 billion [USD1.144 billion]) or a fair market price, whichever is higher. DOCOMO announced in April 2014 that it intended to exercise this option, but negotiations with Tata over the sale have stalled. DOCOMO was reportedly considering filing for arbitration in November last year, after it became embroiled in a disagreement with Tata over the valuation of its stake.

As previously noted by CommsUpdate, following a ruling from India’s central bank, put options must be exercised based on prevailing return on equity at the time the option is exercised – a poor prospect for DOCOMO given that TTSL is currently running at a loss, having registered net losses of INR5.6 billion in the year to end-March 2014. With the exception of the 2010-2011 financial year, Tata has booked a net loss every year for a decade. Explaining its decision to leave the Indian market, a spokesperson for the Japanese group had commented: ‘We thought things were moving very, very smoothly in the beginning… but the spectrum administration in India was so confusing and was beyond our expectation and totally unpredictable.’

India, NTT DOCOMO, Tata Teleservices (TTSL, incl. TTML, Tata Tele Broadband)