Japan's DoCoMo seeks arbitration with Tata over Indian JV stake

Japan's NTT DoCoMo has asked a London court to ensure India's Tata Sons finds a buyer who will pay at least $1.1bn for the Japanese carrier's minority stake in a stressed Indian joint venture: Tata Teleservices.

DoCoMo filed the arbitration request on 3 January with the London Court of International Arbitration to make sure the stake was sold, company spokesman Shunsuke Muraki told Reuters on 5 January.

Tata Sons, the holding company of the Tata Group, in a 5 January statement, said it was trying to resolve the matter.

Tata had tried to sell DoCoMo's stake, unnamed bankers with knowledge of the matter told Reuters, but failed to get bidders owing to concerns about Tata Teleservices' prospects.

The news agency also reported that Tata was willing, and had the liquidity, to buy DoCoMo's stake but could only do so post the central bank's approval.

It was not immediately clear if the Reserve Bank of India (RBI) will approve the deal, as existing rules bar foreign investors from selling stake in Indian firms at a pre-determined price.

DoCoMo is seeking arbitration after Tata failed to find a buyer for its 26.5% stake in Tata Teleservices, one of India's smallest mobile networks which has failed to grow its subscriber base at the same rate as its rivals.

DoCoMo decided to exit Tata Teleservices in July 2014, citing the firm's inability to meet undisclosed performance targets as the reason behind its decision.

DoCoMo gave Tata 90 days to find a buyer. That deadline expired on 3 December, 2014, and under a pact, Tata had to sell the stake for $1.1bn (£718m, €920m), or a fair market price, whichever was higher, according to Muraki.

NTT DoCoMo, in a filing with the Tokyo Stock Exchange, said: "Under the terms of the shareholder agreement between DoCoMo, TTSL and Tata Sons, DoCoMo exercised on July 7, 2014 its right (option) to request that a suitable buyer be found to purchase its TTSL shares for 50% of the acquired price, amounting to 72.5 billion Indian rupees...or a fair market price, whichever is higher.

"Thereafter, pursuant to the shareholders agreement, DoCoMo submitted its request for arbitration to ensure that its right be exercised after Tata Sons had failed to fulfill its obligation, despite DoCoMo's repeated negotiations with Tata Sons regarding the sale of its entire stake in TTSL."

Tata Teleservices' mobile user base rose a meager 2% to 64.78 million at end-October 2014 from a year-ago, lagging both the sector growth of seven per cent and market leader Bharti Airtel's near 10% increase, according to the latest data from India's telecom regulator.

DoCoMo paid $2.2bn in 2009 for the Tata Teleservices stake.