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DOCOMO exits TTSL; RCOM/STTL finally complete poorly-timed merger

1 Nov 2017

NTT DOCOMO has confirmed that it has transferred its shares in Indian mobile provider Tata Teleservices Limited (TTSL) to Tata Sons, finally ending the Japanese group’s prolonged exit from the Indian mobile market. DOCOMO noted that it had received a total of JPY144.9 billion (USD1.28 billion) from Tata, representing the USD1.17 billion it was awarded in damages from the Indian conglomerate, plus interest and other costs awarded. Following the payment, DOCOMO transferred all of its TTSL shares, representing approximately 21.6% of the operator’s outstanding common shares, to Tata Sons and its affiliates.

As noted by TeleGeography’s GlobalComms Database, DOCOMO sought to exit TTSL in early 2014 via its 2009 shareholding agreement, the terms of which stated that DOCOMO would be entitled to either 50% of its acquisition price or the fair market price of the shares, whichever is higher. Tata proved unable to find a buyer for the stake, but Indian authorities also blocked the company from complying with its 2009 agreement, as foreign companies were barred from exiting ventures at a pre-determined prices or assured return. Consequently, DOCOMO sought arbitration on the matter, and in June 2016 the London Court of International Arbitration ruled in favour of the Japanese company, ordering Tata to pay the Japanese firm damages of USD1.17 billion for breaching the terms of their shareholding agreement. A series of court rulings earlier this year overturned the previous objections, clearing the path for Tata to buyback the DOCOMO shares.

In a related development, Reliance Communication (RCOM) has completed its acquisition of the wireless arm of Sistema Shyam TeleServices Limited (SSTL), despite RCOM’s own imminent exit from the wireless market. Under the deal, SSTL’s mobile business – including spectrum, subscribers and assets – was demerged into RCOM, in exchange for a 10% stake in the enlarged company. The merger was initially agreed back in November 2015 and was part of a wider programme to combine RCOM, SSTL and Aircel to form a stronger competitor to dominant providers Bharti Airtel, Vodafone India and Idea Cellular. The prolonged process of securing approvals for the mergers ended the ambition, however: regulatory uncertainty caused the Aircel deal to collapse early last month, prompting debt-laden RCOM to begin plotting its exit from the wireless industry.

India, Aircel, NTT DOCOMO, Reliance Communications (RCOM), Sistema Shyam TeleServices (SSTL, MTS India), Tata Tele Business Services (TTBS, previously TTSL/TTML)

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