Docomo to sue Tata

DoCoMo is trying to sell its stake in Mumbai-based Tata Teleservices at a deep discount, which reflects the underlying problem in the Indian telecom sector. DoCoMo had paid $2.2 billion in 2009 for buying 26.5 per cent stake in Tata Teleservices.

DoCoMo had decided to exit Tata Teleservices in July as the company had not met undisclosed performance targets, and gave Tata Sons 90 days to find a buyer. This deadline expired in December.

“NTT DoCoMo, Inc. submitted on January 3, 2015, a request for arbitration with Tata Sons, Tata Group’s holding company, pursuant to the shareholders agreement regarding the exercise of DoCoMo’s option to sell its stake in Tata Teleservices Ltd (TTSL), a telecommunication service provider in India,” said the company in a statement.

The arbitration notice has been filed in London Court of International Arbitration. DoCoMo said that it exercised, on July 7, 2014, its right to request that a suitable buyer be found to purchase its TTSL shares for 50 per cent “of the acquired price, amounting to Rs 7,250 crore (or 125.4 billion yen), or a fair market price, whichever is higher.”

“DoCoMo submitted its request for arbitration to ensure that its right be exercised after Tata Sons had failed to fulfill its obligation, despite DoCoMo’s repeated negotiations with Tata Sons regarding the sale of its entire stake in TTSL,” said the statement.

The telecom sector has been facing problems from last years. First due to allotment of number of new licences in 2008, there was a hyper-competition in the market, which hit the bottom line of all telecos.

Later on the Supreme Court cancelled all these new licences on the allegation of corruption in their allotment.