Japan’s largest mobile operator, NTT DoCoMo, has announced the acquisition of a 26% stake in Tata Teleservices (TTSL), the Tata group’s telecom arm, which offers CDMA-based services, for $2.7 billion (around Rs 12,770 crore).
This marks the Japanese giant’s entry into the world’s fastest-growing telecom market, which has over three times Japan’s subscribers. ET had first reported the possibility of a deal between the two companies in its September 10 edition.
The transaction is part of a strategic alliance between DoCoMo and the Tatas, the two companies said on Friday. DoCoMo will also make a joint open offer with Tata Sons to acquire up to 20% of outstanding equity shares of Tata Teleservices Maharashtra (TTML), TTSL’s listed subsidiary.
At the ruling market rate—the TTML stock rose 7.6% to close at Rs 17.99 on Wednesday—a 20% stake is valued at Rs 683 crore. Tata Sons, the main holding firm of the group, holds 45% stake in the unlisted TTSL, which in turn has a 38% equity in TTML, a mobile service provider in Mumbai and the rest of Maharashtra and Goa.
“There is no regulatory obligation for the open offer. However, it is felt that the Japanese giant’s equity participation will help TTML,” said a source close to the development. DoCoMo will be a technology provider for TTSL.
A person with knowledge of the transaction said DoCoMo will pick 20% in TTSL through subscription of fresh shares and 6% from existing shareholders. The transaction will need approval from the Foreign Investment promotion Board (FIPB). DoCoMo will have three board seats.
In addition to Tata Sons’ 45% stake in TTSL, Tata Communications holds 15% in the company. Singapore investment company Temasek and Chennai-based investor C Sivasankaran hold 9.9% and around 8% in TTSL. The rest is held by various Tata group companies.
The deal values TTSL, India’s sixth-largest operator with over 30 million subscribers, at around $10.4 billion. The per subscriber valuation works out to $346.6. Bharti Airtel, largest Indian telecom player, had a market cap of $24.3 billion at Wednesday’s closing price. Airtel had 80.1-million subscribers in October-end.
Source: Economic Times