Tata agrees to buy out DoCoMo for Rs 23.34 a share

The Japanese telecom giant – DoCoMo has burnt its fingers in India and is in more trouble with the Tata Group offering to buy out the telecom giant’s stake in Tata Teleservices at Rs. 23.34 per share. This is half the earlier offer of Rs 58.

According to The Business Standard, the Tata group had made this offer after valuing the company for just Rs 11,000 crore. DoCoMo had invested in Tata Teleservices valuing each share at Rs 117 per share.

The latest move by Tata group comes after RBI had earlier rejected Tata’s proposal to buy DoCoMo’s share for about Rs 7250 crore or Rs 58 per share.

The latest Tata offer comes on the basis of a fair value arrived by PriceaterhouseCooper and is 60% lower than an earlier offer. The Yen’s 30% depreciation has further compounded the woes of the Japanese company and reduced the original investment of DoCoMo in Tata Teleservices and an erosion of 90% value.

Meanwhile, it is reported that DoCoMo has moved to the London Court of Arbitration to get a valuation of Rs 58 per share.

Earlier in November 2014, Tata Sons applied to RBI to buy out the 26.5% DoCoMo shares for Rs 7250 crore at the rate of Rs 58.045 per share. It was half the price that the Japanese company had paid in 2009. DoCoMo is said to have invested $2.2 billion in Tata Teleservices.

Tata has used a clause in the agreement which promised DoCoMo will get at least 50% of its investments if it decide to exit in five years. The Japanese company is also believed to have agreed to increase investments if Tata Teleservices completed certain performance yardsticks.

However, the Tata group has failed to achieve these yardsticks and has been accumulating losses. This has been one of the reasons for DoCoMo exiting the venture. Tata Sons had engaged PriceWaterhousecooper to make a valuation and come with the fair value of Rs 23.34 per share.