Govt rules out intervention in DOCOMO/Tata dispute

24 Aug 2016

The Indian government does not intend to relax rules to allow Japan’s NTT DOCOMO to exit its joint venture with Tata Group at a pre-determined price, the Economic Times writes. Under the 2009 agreement that saw DOCOMO take a 26.5% stake in Tata Teleservices (TTSL), the Japanese group was given the option of exiting the partnership if TTSL failed to meet certain financial targets, in which case DOCOMO would receive either a fair market value for its shares or 50% of the original purchase price. DOCOMO chose to enact this option in March 2014, but the matter quickly stalled. Tata was unable to find another buyer for the shares but, as existing laws stipulated that no foreign investor could exit its investment at a pre-determined price or with assured return, it was not permitted to pay the previously agreed price of INR58 (USD0.86) per share – INR72.5 billion for the entire stake – instead of the INR23.34 per share valuation determined by independent assessors.

Responding to calls to intervene in the matter, the government has made it clear that it does not want to become embroiled in the issue, as it would require the retrospective amendment of rules dating back to 2007 – an extreme measure with potentially far-reaching consequences which the government is reluctant to implement.

As noted by TeleGeography’s GlobalComms Database, Tata was ordered by a London arbitration court in June 2016 to pay damages of USD1.62 billion to its Japanese partner, whilst DOCOMO would release its shares in the cellco to Tata.