DoCoMo clearing decks to exit India

Jul 02 2014, 08:07 IST
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Recognised impairment charge of Rs 3,433 crore on TTSL investment in FY13-FY14 Recognised impairment charge of Rs 3,433 crore on TTSL investment in FY13-FY14
SummaryRecognised impairment charge of Rs 3,433 crore on TTSL investment in FY13-FY14

a Tata Sons spokesperson said that the group did not comment on such matters.

“On your query regarding Tata Sons and Tata Teleservices, we would like to reiterate the position communicated on April 25: As also stated by NTT Docomo, it is not possible to predict how events will unfold; however, Tata Sons is cognisant of its responsibilities, and will act keeping in mind the interests of all stakeholders and in accordance with law,” she said, adding that TTSL was an integral part of the Tata group.

An email sent to NTT Docomo on Tuesday evening did not elicit any response till going to press.

Docomo has invested a total of R15,285 crore for a 26.5% stake in TTSL, hoping to be a part of the growth story in the Indian telecom sector. Docomo invested around R12,750 crore in TTSL in March 2009 and made an additional investment of R2,545 crore in May 2011.

Hurdles such as allegations of corruption and lack of policy-level clarity in the allocation of telecom spectrum, a high degree of debt taken on by companies to pay for such spectrum, and an intense price war between telecom operators saw the sector become unviable for many telcos, especially new entrants. Other foreign investors like Norway’s Telenor SA and Dubai-based Etisalat have also burnt their fingers in the Indian market.

The agreement between Docomo and the Tata group states that if TTSL failed to achieve certain performance targets by March 31, the former would be entitled to exercise an option to offload its entire holding in TTSL at a valuation that is half the acquisition price (around R7,250 crore) or the fair market value of its holding, whichever is higher.

“The above mentioned right became exercisable on May 30 and Docomo plans to exercise the (right) and expects to sell (its) TTSL shares in accordance with the agreement,” Docomo said in its 2013-14 annual report. “It is uncertain how the option will be performed, however, and Docomo is not able to predict how events will unfold.”

Interestingly, even though Docomo has planned to exit its investment in TTSL, it has put in place one of its executives as a new member on the latter’s board of directors, the Japanese firm’s annual report shows. Hajime Kii, senior vice-president and managing director of human resources management at Docomo, has been on the board of TTSL since last month, the

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