News
Japanese operator announces arbitration court ruling but admits its battle to exit Tata Teleservices is not over yet.
NTT DoCoMo on Friday revealed that a U.K. arbitration court has ruled in its favour regarding its exit from the Indian mobile operator joint venture it shares with Tata Sons.
The Japanese firm said the London Court of International Arbitration has ordered that Tata Sons pay it US$1.172 billion in damages for breach of the pair’s shareholders agreement with regard to Tata Teleservices Ltd.
Essentially, the shareholder agreement made provision for DoCoMo to exit the venture in return for either fair market value or for at least half of the money it invested in March 2009 for a 26.5% stake, a sum that comes to 72.5 billion rupees, or around $1.17 billion; the exchange rate is based on a December 2014 figure, DoCoMo said.
DoCoMo exercised it option to exit the JV in July 2014, putting the onus on Tata to find a buyer for the shares. When Tata failed to do so, the Japanese firm turned to arbitration in January last year.
The damages award is a big step forward for DoCoMo, but it appears the case could still drag on as "some matters remain uncertain," it said, in a statement.
These uncertainties include whether or not Tata Sons will pay the damages and when the transfer of Tata Teleservices’ shares will take place, it explained.
"Accordingly, DoCoMo is not able to predict how events will unfold," the telco said. "The effect on DoCoMo’s corporate earnings for the fiscal year ending 31 March 2017 cannot be forecast at this time due to these uncertainties," it added, noting that it will update on developments in a timely fashion.
Indeed, according to local press reports, Tata could challenge the ruling.
The Economic Times cited unnamed sources as saying that Tata will either challenge the damages award directly, or question its enforceability; either way, the case will end up in an Indian court soon, the paper said.
Tata Teleservices, which operates under the Tata DoCoMo brand – for now, at least – is one of India’s smaller mobile operators with a market share of 5.07% as of the end of April, according to the Telecom Regulatory Authority of India (TRAI).
It is a challenging operating position, at a time when consolidation is starting to come to the market. Indeed, there were rumblings last year that Tata itself is keen to sell out of the mobile market, with another small player Telenor named as a possible buyer, but since then there has also been talk of a Telenor exit.
This summer’s planned spectrum auction could provide a clearer picture of how many mobile operators aim to stay in India for the long term and how many have one eye on the door.
