The London Court of International Arbitration has ruled in favour of Japan’s NTT DOCOMO regarding a dispute over its 26.5% stake in Indian mobile provider Tata Teleservices Ltd (TTSL). The court ordered Tata Sons, the holding company for Tata Group, to pay damages of USD1.172 billion to DOCOMO for breaching their shareholding agreement, and DOCOMO will release its entire stake in TTSL to Tata Sons, or an affiliate.
Under the terms of the shareholder agreement between DOCOMO and Tata, the Japanese firm had the option to exit TTSL if the cellco failed to meet certain financial targets, with Tata required to either find a suitable buyer for the shares, or to buy out DOCOMO itself. The agreement also specified DOCOMO would receive 50% of the price it originally paid for the shares – equating to around INR72.5 billion (USD1.06 billion), although the damages were calculated based on the exchange rate in December 2014 – or the fair market value, whichever is higher. In July 2014 DOCOMO exercised the option and requested that Tata begin the process of finding a suitable buyer for its stake. Tata failed to find a buyer willing to pay the arranged amount for DOCOMO’s stake, however, and in November 2014 it requested permission from the Central Bank of India (CBI) to purchase the shares from DOCOMO at the previously agreed price of INR58.00 per share, rather than their independently determined market value of INR23.34 per share. The request was rejected by the CBI, which had earlier that year introduced new rules stating that put options must be exercised based on prevailing return on equity at the time that the option is exercised, rather than a pre-determined value. DOCOMO initiated arbitration proceedings in January 2015.