Tata-DoCoMo headed for international arbitration after RBI rejects Tata buying Docomo’s stake for $1.1 billion

The Reserve Bank has rejected Tata Sons’ proposal to buy Japanese telecom firm NTT DoCoMo’s stake in their struggling joint venture, Tata Teleservices 7th largest operator by market share, for about 1.1 billion dollars (Rs 7,250 crore).

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“The RBI has conveyed that it cannot accede to this request as the same is not in conformity with the extant FEMA regulations and has advised that any such purchase of shares be at current fair value of shares,” Tata Sons said in a statement.

Tata Sons had in November last year applied to RBI to purchase DoCoMo’s 26.5 per cent stake at Rs 58.045 per share (totalling about Rs 7,250 crore) – half the price which the Japanese firm paid in 2009.

“Tata Sons had made an application to the Reserve Bank of India for a special permission to pay DoCoMo, as per the shareholders agreement, at a price that was higher than the current fair value of the TTSL shares,” the statement said.

It added: “This issue will now have to be resolved in the arbitration between the parties. Steps towards initiating arbitration have been taken. We will not be able to comment further as the matter is sub-judice.”

DoCoMo in July, last year announced plans to exit Tata Teleservices, the 7th biggest mobile operator in India.

The exit, it had said, was to happen as per the 2009 agreement with Tatas when the Japanese firm invested USD 2.2 billion in Tata Teleservices. As per the agreement, it was to get the higher of either half the original investment or a fair value.

Tata Sons had engaged PwC to determine the fair value in relation to the equity shares of Tata Teleservices Ltd. As per their report, the fair value was Rs 23.34 per share.