Tata and DoCoMo separate, prepared for negotiations over valuation

 

Tata and DoCoMo separate, prepared for negotiations over valuationIn 2009 and 2011 Japan’s NTT DoCoMopurchased its stake in installments in Tata Teleservices for a whopping $2.7 billion. Back then telecom was the rising sun of India’s rapidly-growing economy. And now after 5 years of successful collaboration DoCoMo has decided to split their ways from Tata Teleservices by selling its 26.5 % stake, ending their association. The divide will be executed through pre-agreed put option, resulting in lengthy negotiations over valuation. The Indian conglomerate will renegotiate the amount it has to pay to buy back the shares.

The agreement between the companies reads that Tata Group needs to ensure that DoCoMo gets higher than the half of investment it made. Rs. 7,250 is the amount claimed by DoCoMo by refunding its 26% stake in Tata Teleservices. If the Tatas failed to do so, they’ll have to pay the stakes fair market price.

DoCoMo might not get the price it is looking for, because the net worth of Tata Tele is negative and it has been suffering losses. In May, RBI has stated in its monetary policy that they are finding a way to link such options to gain a fair market value and will enforce the decision soon.