Docomo Has Its Payday As Tata Transfers Arbitration Award
Docomo has recieved ¥144.9 billion, or roughly $1.28 billion from Tata Sons.
Japan's NTT Docomo, the estranged telecom partner of Tata Sons in India, received the arbitration award that will allow it to sell its stake in Tata Teleservices Ltd. and settle a three-year old dispute.
Docomo has received ¥144.9 billion, or roughly $1.27 billion, from Tata Sons as approved by the Delhi High Court in May, according to a media statement issued by the company. Accordingly, Docomo has transferred all its shares in Tata Teleservices to Tata Sons and the companies designated by them, the statement added.
NTT Docomo has been fighting Tata Sons over the right to sell its 26.5 percent stake in the Indian wireless venture Tata Teleservices Ltd. as per the terms of a 2008 agreement which said that in case it exits the venture within five years, it will be paid a minimum 50 percent of the acquisition price.
Docomo moved the Delhi High Court to enforce an order it won in June last year from the London Court of International Arbitration, which ruled Tata should pay $1.17 billion to NTT Docomo as compensation for breaching the agreement. The two sides moved the London court as the Indian company was not able to find a buyer for the Japanese telecom major’s 26.5 percent stake in their joint venture, (TTSL), when it made an exit from the business.
The Reserve Bank of India opposed the arbitration award payment, citing a rule that foreign investors could exit an investment only at prevailing “fair value", even though Tata had agreed to pay and deposited the money with the court.
The award was the final hurdle for Tata struggling to turn around its telecom business. Earlier in October, Tata announced that Bharti Airtel will take over its mobile services business in a “debt-free, cash-free” merger. The Sunil Mittal-led operator would get 4 crore customers and assets of Tata, along with a small portion of unpaid spectrum liabilities as part of the deal. The merger allows the group to shed a loss-making business which Tata Sons chairman N Chandrasekaran said was “close to impossible” to recover.
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Docomo expects the arbitral award to reflect in its October-December quarterly results. It also expects to include a loss of ¥29.8 billion in the same results, the statement said.
Shares of NTT Docomo in Japan, closed 0.45 percent lower ahead of the announcement on Tuesday. Shares of Tata Teleservices (Maharashtra) Ltd. in Mumbai, ended trade 4.4 percent higher.