NTT DoCoMo has decided to sell its around 26.5% stake in its joint venture with Tata Teleservices as agreed between the two partners, the Japanese company said Friday.
“Under the agreement, Docomo holds the right to require that its TTSL shares be acquired for 50% of the acquisition price, which amounts to Rs 7250 crore or a fair market price, whichever is higher,” said the statement.
“In the event that TTSL fails to achieve these performance targets by the end of the fiscal year ended March 31, 2014, DOCOMO plans to exercise the above-mentioned right in or before June 2014,” the contract between the two companies had stated.
The Japanese telco had purchased about 26.5% in Tata Teleservices in stages in 2009 and 2011 for $2.7 billion. As part of the agreement, certain performance targets were set for the Tata companyBSE -1.01 % that was on the verge of launching GSM technology services at the time.
“It is uncertain how the option will be performed, however, and DOCOMO is not able to predict how events will unfold. The effect on DOCOMO’s corporate earnings for the fiscal year ending March 31, 2015 cannot be forecast at this time due to these uncertainties”, Docomo said in the statement.
The agreement between the two companies allows DoCoMo to sell the stake to Tata Sons Ltd.
Unlisted Tata Teleservices expanded into lucrative 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.