Tata Sons and Japan’s NTT DoCoMo on Tuesday agreed to settle a dispute in connection with the termination of a joint venture. Tata Sons withdrew objections to arbitration award in favour of NTT DoCoMo, various TV channels reported. The court said that it will consider the application for settling dispute on March 8. Tata Teleservices and DoCoMo have been locked in a long tussle over the Japanese company’s move to exit a partnership formed in 2009.
Under the terms of that deal, in the event of an exit, DoCoMo was guaranteed the higher of either half its original investment, or its fair value. When DoCoMo decided to get out in 2014, Tata was unable to find a buyer for the Japanese firm’s stake and offered to buy the stake itself for half of DoCoMo’s $2.2 billion investment.
The Reserve Bank of India blocked Tata’s offer, saying a rule change the previous year prevented foreign investors from selling stakes in Indian firms at a pre-determined price. Docomo proceeded to initiate arbitration in a London court, and won it. Tata was asked to pay a penalty of $1.17 billion, which it has deposited with the Delhi High Court.
Earlier in the day, Japan’s Nikkei Daily reported that Tata Sons had agreed to pay NTT DoCoMo about $1.17 billion in connection with the termination of a joint venture in India without citing its sources. Indian telecom sector, the world’s second largest mobile services market after China, is in the midst of massive consolidation with incumbent operators joining forces to take on aggressive newcomer Reliance Jio.
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Reliance Jio’s entry into the telecom space has forced the incumbent players to drastically cut tariffs – as much as by 66% – in order to retain their customer base, and has put the entire sector under tremendous pressure of choosing between protecting margins and user base.
Delivering a keynote address at the Mobile World Congress in Barcelona, Airtel Chairman, Sunil Bharti Mittal said, “Large countries only need three service providers while smaller nations could be covered by two carriers. Governments have got it wrong for too long. Regulators have always felt giving out new licences means more money for the government and more competition for the customers. It’s quite the contrary
The comments come days after his company, Bharti Airtel announced acquisition of Norwegian company Telenor’s India unit. Also, its smaller rivals Vodafone and Idea Cellular are considering merging. The Airtel Chairman said one doesn’t want a situation where there are one or two “healthy” operators, while another similar number struggle while other “three or four are in the ICU”.
(With inputs from Agencies)