NTT Docomo eyeing to raise stake in Tata Teleservices

Tata Teleservices (Maharashtra) Ltd. | Telecommunication - Service Provider | Telecom | BSE: 532371 | NSE: TTML

14 Dec 2011 Evaluate

Japanese giant NTT Docomo is eyeing to raise its stake in Indian mobile operator, Tata Teleservices (TTSL). The Japanese giant is set to discuss an option of increasing its stake to 35% in the next four months. NTT Docomo’s plan of hiking its stake in TTSL is part of two stage plan that allows the Japanese company to ramp up shares of TTSL if it meets certain performance parameters.

In 2008, NTT Docomo had bought a 26% stake in Tata Teleservices for $2.7 billion. At that time, to emerge as the largest shareholder in the TTSL, NTT Docomo was given two call options which would be available in March 2012 and two years later in 2014. However, in case TTSL is unable to achieve certain benchmarks, NTT Docomo can refrain from exercising both the options and sell the entire stake back to Tata in 2014. Further, these benchmarks are linked to the performance of Tata Teleservices.

The $83 billion Tata Group through multiple entities hold about 60% stake in TTSL, in which private equity investor Temasek and serial entrepreneur C Sivasankaran are minority investors with 7% and 6% stake each. But, if Docomo exercises the first option of increasing the stake to 35%, then it cannot force a buyback on Tatas two years later.

Tata Teleservices is a promoter of Tata Teleservices (Maharashtra), presently Tata Teleservices and NTT DOCOMO Inc holds 37.65% and 12.12% in Tata Teleservices (Maharashtra) respectively.