Japan's NTT DoCoMo Puts Indian Subsidiary Stake Up for Sale
Published on: 25th Apr 2014
By: Ian Mansfield
Japan's NTT DoCoMo has announced that it is putting its entire 26.5% stake in an Indian mobile network up for sale.
The company bought the stake in Tata Teleservices (TTSL) in 2008, and had a number of put-options in place, one of which enables it to force a sale of its stake if certain performance targets are not met.
The mobile network has struggled in recent years, and while the performance targets are not publicly known, it is widely thought that they were missed by a very large margin.
NTT DoCoMo said in a statement today that it will exercise the option to sell the stake, although at the moment it is unsure how that will proceed.
Under the terms of the agreement, it can force the mobile network to buy back its stake for 50% of the acquisition price, which amounts to 72.5 billion Indian rupees () or a fair market price, whichever is higher.
However, the debt laden and weakly performing TTSL is unlikely to be in a strong enough position to be able to buy the shares without seriously imperiling the mobile network's long term future.
There has been a general rumour in recent months that Vodafone could seek to take advantage of the situation and buy the mobile network, although it has said that more clarity about the country's rules on mergers needs to be sorted out first.
If a deal were to go ahead, the merged Vodafone-TTSL would overtake Bharti Airtel to become the country's largest mobile network, with around 248 million subscribers.
Due to the uncertainties surrounding the sale of NTT DoCoMo's stake in the Indian mobile network, it warned that it cannot predict the effect on its own financial performance at the moment.
NTT DoCoMo paid USD2.7 billion for its 26.5% stake back in 2008 and paid a further USD176 million in 2011 to maintain its holding when the company carried out a fund raising exercise.