iWorld

NTT Docomo to exit from Tata Teleservices in face of losses

NEW DELHI: Japan’s telecom network NTT Docomo has decided to sell its 26.5 per cent stake in the loss making Tata Teleservices.

 

In its board meeting in Japan yesterday, NTT Docomo board took the decision to exit from TTSL following the poor performance of the Indian telecom operator.

 

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.

 

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 fallen to Rs 1,863 crore in FY 2013 from Rs 2,996 crore in FY 2012 and Rs 5,941 crore in FY 2011. The company’s 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.

 

The Indian telecom sector appears set to see consolidation and TTSL will be one of the targets for telecoms such as Aircel, MTS India and Telenor etc.

 

Under the 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 per cent 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 fiscal 2014, Docomo can exercise the right in or before June 2014. Docomo on its website said it is uncertain how the option will be performed.

 

It is also understood that the Tata group, which has around 59.45 per cent stake in TTSL, had been looking at an exit route from the telecom business.

 

Reuters 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.

 

Interestingly, this coincides with UK telecom’s Vodafone increasing its stake in Vodafone India to 100 per cent. 

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