Court clears Tata to pay USD1.2bn settlement

2 May 2017

The Delhi High Court has approved the USD1.2 billion settlement between Tata Sons and its partner NTT DOCOMO over the latter company’s exit from their telecoms joint venture Tata DOCOMO. The Economic Times writes that the court rejected objections from the Reserve Bank of India (RBI), which sought to block the deal on the basis that foreign companies are forbidden from selling stakes in Indian companies at a pre-determined price.

As noted by TeleGeography’s GlobalComms Database, under the terms of the 2009 agreement – through which DOCOMO had purchased a 26.5% stake in the cellco – the Japanese firm had the option to exit the partnership if the operator failed to meet certain financial targets, with DOCOMO set to receive either 50% of its acquisition price, or the fair market price of its shares, whichever is higher. NTT DOCOMO chose to enact the option in March 2014, but Tata Sons was unable to find another buyer for the shares, forcing Tata to buyout its partner itself. The RBI denied Tata permission to pay out for the shares, however, citing rules preventing foreign firms from exiting investments at a pre-determined price or with assured return, and noting that the pre-agreed price of INR58 (USD0.9) for each of NTT DOCOMO’s shares was substantially higher than the INR23 per share valuation determined by independent assessors.

In June 2016, however, a London arbitration court ordered Tata to pay damages of USD1.2 billion to NTT DOCOMO for breaching their shareholding agreement. Under the same order, NTT DOCOMO would also release its entire stake in the wireless firm to Tata Sons or an affiliate.

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