British Telecom major Vodafone PlC is tipped to be the most likely JV partner with Tata Teleservices and may pick up the 26.5 per cent stake that the Japanese telecom major NTT Docomo is to sell off by June. The finalization of the deal would only come after the new Government is in place after the lok Sabha elections, sources said.
“Vodafone is the strongest candidate for the stake and has been previously talking to the Tatas in a number of rounds,” said leading sources in the industry.
Tata Sons has been getting signals from Vodafone since a long time while in January this year rumours were rife that that latter had almost got in the shortlist of Tatas even though the latter had reserved the first right of refusal on the matter as per its majority shareholding in the venture. It was said that the Tatas were trying to push their Japanese counterpart to sell their 26.5 per cent stake to Vodafone even as the latter was wanting to exit the joint venture.
However, the evaluation of the holding which is like a ‘put option’ will be a complex process and is to be completed by June as also as Tata Teleservices in not a listed company, hence there has to be a price discovery stocks held by NTT Docomo. However, sources say that the deal is also likely to attract some objections from the RBI as the latter has said that the FDI norms will have to be met regardless of any agreement between the companie therein involved in the joint venture.
“The NTT Docomo pull out from TTSl is a part of the larger move by Japan to pull out it MNCs from loss making ventures around the world,” said sources. It is learnt that the Japanese government has been pushing this telecom giant from withdrawing its investments in and around the world particularly from the loss making ventures. The move also comes in the aftermath of the Japanese pharma major Daiichi Sankyo pull out from Ranbaxy earlier this month. Since NTT DoCoMo holds 26.5 per cent in Tata Teleservices.
As per the intial shareholders contract between the NTT Docomo and Tata Teleservices the latter former had agreed to the clause of the NTT Docomo to return its acquired share holding to Tata Teleservices if the JV failed on the performance parameters by March 31, 2014, as per its written conditions. It has said that the sale price would be 50 per cent of the acquisition price, which comes to Rs 7,250 crore, or a fair market price, whichever is higher.
NTT DoCoMo, TTSl and Tata Sons had in March 2009 signed shareholder agreement for business alliance. NTT DoCoMo picked up 27.31 per cent stake in Tata Teleservices for Rs12,924 crore and 20.25 per cent in Tata Teleservices (Maharashtra) ltd - the listed arm of TTSl - for Rs949 crore. TTSl said it continues to be an integral part of the Tata group.
Even as TTSl has been gaining in fixed line connections, it has seen frequent reduction in mobile connection which form major chunk of its business.
As per last available data the company had gross revenue of about Rs2,900 crore (excluding TTMl) in the July-September quarter of 2013. Tata Teleservices has seen increase in debt which stood at Rs23,986 crore in FY’12.