Ratan Tata's return spells good vibes in Docomo spat

MUMBAI: With Ratan Tata back at the helm of Tata Sons as interim chairman, prospects have brightened for a positive end to the ugly spat between the Indian conglomerate and NTT Docomo over the Japanese company’s attempt to exit their joint venture Tata Teleservices, people familiar with the matter said. The change means the entire dispute could be looked at “with a fresh pair of eyes,” said one person.
Sources said a top Tata executive is believed to have called senior officials at Docomo after Cyrus Mistry was removed as chairman of the Indian group earlier this week and replaced by Ratan Tata. Lawyers from both sides have been in contact after Mistry’s exit but no concrete developments have taken place, said the people cited above.



“But things can only get better after the October 22 meeting, which was meant to be defining but ended in a stalemate,” said a second person. At the high-level meeting in Singapore on that date, Mistry stuck to the position that Tata couldn’t pay its Japanese partner the arbitral award of $1.17 billion, citing Reserve Bank of India’s rules prohibiting this. Change in leadership may lead to a broader discussion on resolution measures such as payouts for alternate investments, revival of merger talks and dilution of equity, none of which has been touched upon, another person said. “There have always been positive and hawkish voices in the Tata Group and Mistry’s has been the most hawkish,” one person said. Yet, “even as we get hopeful, with the negotiating team remaining constant, we still have no communication of change in approach or mindset as of now”.

Tata Group spokesperson Debasis Ray declined to comment saying, the matter was “sub judice”. Docomo declined to comment. Mistry was unavailable for comment. After the Tata Sons board unexpectedly sacked him on Monday, Mistry sent it an email in which he described the telecom business as “continuously haemorrhaging.” He said that if the group was to exit the business via a fire sale or closure, the cost would amount to $4-5 billion, apart from a payout of at least $1 billion to Docomo. He also questioned the deal with the Japanese company.

“The original structure of the Docomo transaction raises several questions about its appropriateness from a commercial or prudential perspective within the then prevailing Indian legal framework,” Mistry had said. “In light of all this, our strategy over the past three years has been to increase Ebitda (earnings before interest, taxes, depreciation and amortisation) from Rs 400 crore to Rs 2,500 crore in the hope of being a potential player in the consolidation of the industry.”

Tata Teleservices’ financial struggles had prompted the Japanese company to seek an exit. The arbitration award was made after the Tatas failed to find a buyer and didn’t want to buy out Docomo’s 26% stake at pre-agreed terms – 50% of the value of investment, or Rs 7,250 crore.

The Japanese company has since moved the Delhi High Court to implement the award, one which the Tata Group says it is willing to pay, but can’t due to RBI’s rules. Docomo, which says that the Tatas are using the RBI rules as an excuse not to pay up, has also moved courts in London and the US to attach the group’s assets for recovering the money.