If reports are to be believed, Japanese telecom giant NTT Docomo is in talks to raise its 26% stake in Tata Teleservices, even as the Indian partner is evaluating a buyback of Docomo’s shares.
Docomo has two call options it can exercise — first in the present month and second in March 2014, to increase its stake in Tata Teleservices. The call options equip the Japanese conglomerate with a right, but not an obligation, to increase stake in its Indian telecom partner under certain pre-specified conditions. According to some industry sources, Docomo is eyeing to increase the stakes to 35%, from its current 26% investment.
As per the shareholder agreement signed between the two partners, Docomo can raise the stakes if Tata Teleservices meets certain performance parameters. The same agreement also allows the company of Indian origin to mandatorily buy out the entire stake of the Japanese company in 2014 if the latter is unable to find a strategic investor or the former is unable to achieve a target subscriber base, along with minimum revenues and profits for the company in specified time-frame.
Docomo bought its stake in Tata Teleservices for $2.7 billion in 2008, thus giving birth to Tata DOCOMO, a telecom service on the GSM as well as CDMA platform. Out of the 26% stake, 6% stake was sold to Docomo in 2008 itself, while the remaining 20% was sold in the form of new shares issued by Tata Teleservices.
During the past two years, Tata DOCOMO has also become the first Indian private operator to launch 3G services in India and stands to redefine the very face of telecoms in India. The Tokyo based company is Japan’s market leader when it comes to mobile telecommunication with nearly 55% of the country’s population as its subscribers.
Furthermore, it would be interesting to see how the JV shapes up, considering the fact that the JV between Vodafone and Essar did not exactly prove to be fruitful.
