Japan’s telecom network NTT Docomo today decided — at its board meeting — to sell its 26.5 percent stake in the loss making Tata Teleservices.
NTT Docomo board took the decision on Friday to exit from TTSL following the poor performance of the Indian telecom operator.
The exit is happening at a time when UK telecoms Vodafone is increasing its stake in Vodafone India to 100 percent.
Indian telecom sector is also set to see consolidation and TTSL will be one of the targets for telecoms such as Aircel, MTS India, Telenor, etc.
As per an agreement signed in March 2009 among Docomo, TTSL and Tata Docomo, Docomo holds the right to require that its TTSL shares be acquired for 50 percent of the acquisition price, which amounts to 72.5 billion Indian rupees or a fair market price, whichever is higher, in the event that TTSL fails to achieve certain specified performance targets.
If TTSL fails to achieve performance targets in fiscal2014, Docomo can exercise the right in or before June 2014.
Docomo in its website said it is uncertain how the option will be performed.
NTT Docomo had invested 266.7 billion yen ($2.61 billion) in Tata Teleservices – 252.3 billion yen in March 2009 and 14.4 billion yen in May 2011.
Will Tata sell TTSL
Interestingly, Tata group, which has around 59.45 percent stake in TTSL, has been looking at an exit route from the telecom business, according to media earlier media reports.
Docomo is exiting from TTSL because it made a net loss of Rs 4,858 crore on revenues of Rs 10,859 crore in fiscal 2013. In FY 2012, TTSL posted net loss of Rs 4,228 crore on revenues of Rs 10,115 crore and Rs 3508 crore net loss on Rs 8,357 crore in FY 2011.
In addition, TTSL’s net worth has eroded to Rs 1,863 crore in FY 2013 from Rs 2,996 crore in FY 2012 and Rs 5,941 crore in FY 2011. TTSL debt increased to Rs 23,491 crore in FY 2013 from Rs 19,299 crore in FY 2012 and Rs 17,651 crore in FY 2011.
Reuters today reported that the diversified Tata Group conglomerate would buy the stake. Singapore state investor Temasek and businessman C Sivasankaran also own small stakes in Tata Teleservices, a loss making telecom venture of Tatas.
Tata Teleservices expanded into GSM-based mobile phone services after the deal with Docomo and amassed subscribers by offering a cheaper per-second billing plan, but it subsequently failed to build on its initial success and has lost market share in the past two years.
It currently ranks seventh in terms of subscriber numbers among the 12 firms that operate in country’s fiercely competitive telecoms market.
Analysts expect Docomo to report about 80 billion yen ($780 million) in related losses in the financial year ended on March 31 when it announces its earnings at 0600 GMT.
Baburajan K
editor@telecomlead.com
