Tata Tele, DoCoMo agree to end $1.2 billion dispute; suggest entire payout without violating RBI rules

By: | Published: February 28, 2017 12:12 PM

Tata Teleservices on Tuesday agreed to end an over two-year-old bitter spat with Japanese telecom firm NTT DoCoMo over $1.2-billion payout, sending the shares of its listed unit Tata Teleservices (Maharashtra) Ltd soaring about 20%.

Tata Sons, India’s largest business house, and NTT DoCoMo, its former partner in the telecom joint venture Tata Teleservices, have reportedly told the Delhi High Court that both the companies have agreed to settle their dispute, with the former withdrawing its objection to a London-based arbitration court’s award of damages in favour of the latter. (Image: PTI)

Tata Teleservices on Tuesday agreed to end an over two-year-old bitter spat with Japanese telecom firm NTT DoCoMo over $1.2-billion payout, sending the shares of its listed unit Tata Teleservices (Maharashtra) Ltd soaring about 20%.

Tata Teleservices, a group company of India’s largest business house Tata Sons, and its former telecom joint venture partner NTT DoCoMo have reportedly told the Delhi High Court that both the companies have agreed to settle their dispute, with the former withdrawing its objection to a London-based arbitration court’s award of damages in favour of the latter.

The proposed settlement between the two companies comes close on the heels of N Chandrasekaran taking over as the group Chairman after the ouster of Cyrus Mistry, who sparred with the group’s parent company over the allegations of failing to resolve the dispute.

The court will consider their application for settlement of the dispute on March 8.

NTT DoCoMo had exited equity shareholding in Tata Teleservices in March 2014, after a continuous fall in the value of its 26% stake in the Indian telecom services operator. However, the fair value of Tata Teleservices at the time of DoCoMo’s exit at Rs 23 per share was sharply lower than the sell option price of Rs 58 per share agreed at the time of its entry.

While DoCoMo insisted on exercising its sell option at the agreed upon price, the Reserve Bank of India intervened and disallowed Tata Sons from buying shares at Rs 58/share, saying that the sale at the option price would violate Indian foreign exchange rules under a new amendment.

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Following this, DoCoMo proceeded to initiate arbitration in a London court, which awarded $1.17 billion in damages to DoCoMo to be recovered from Tata Sons. The Tata group on its part, under the chairmanship of Cyrus Mistry, expressed its inability to abide by the arbitration award citing RBI mandate.

In today’s filing to the Delhi High Court, Tata and DoCoMo have reportedly submitted that the companies would not oppose RBI intervention in settlement terms. Instead, both are learned to have proposed a way out which would allow Tata Sons to pay the entire $1.17 billion to DoCoMo, without violating the foreign exchange rules as set by the RBI.

The settlement, if it goes through, would allow Tata Teleservices to merge with another telecom company, a current trend in the Indian telecom industry amid service providers making moves towards consolidation to look for scale and operational efficiencies to take on the onslaught of competition from the giant new entrant Reliance Jio.

Tata Teleservices (Maharashtra) Ltd shares were trading up 15.1% at Rs 7.7 on BSE, after rising to the day’s high of Rs 8.02.

 

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